CONFIDENTIAL
THE FINANCIAL SYSTEM OF HONG KONG
1.
Hong Kong's financial system enjoys virtually complete independence in practice from the UK in the management of its internal financial affairs, although it is based on the British Parliamentary system of open accountability regarding taxation and. public expenditure and is derived from authority delegated from the
UK.
2. All fiscal measures have to be debated and approved by the Legislative Council; no hidden transfers are made, UK or elsewhere. Hong Kong's budget has to take into account not only fiscal prudence but the acceptability of the Hong Kong public and the need to maintain international confidence in Hong Kong's financial affairs.
3. The Legislative Council approves funds for each kind of expenditure. It has a Finance Committee which like the Legislative council as a whole is composed of a majority of Unofficial members who are the only ones to have a vote on the Finance Committee. The Committee examines all draft estimates and approves proposals for additional funds.
4. The accounts are published monthly and a full set annually. They are edited by the Director of Editing and are made freely available. Officials can be summoned by the Public Accounts Committee to account for expenditure.
5. Among the proposals followed in the drawing up of financial policy are the following: the growth rate of public sector expenditure is related to the growth rate of the economy; the pattern of its expenditure reflects the Government's view, after a wide process of public consultation of the priorities of major Government programmes; there must be a balance between direct and indirect taxation (note; only 260,000 out of a total of 2.4 million wage and salary earners pay any salaried tax).
6. Hong Kong's budget showed a deficit of 3.5 billion in 1982/83. For 1983/84, estimated expenditure is 35.5 billion, with estimated
CONFIDENTIAL