CONFIDENTIAL
THE FINANCIAL SYSTEM OF HONG KONG
C
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 to the UK or
elsewhere. Hong Kong's budget has to take into account not only
fiscal prudence but public acceptability in Hong Kong 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.
They
4. The accounts are published monthly and a full set annually.
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 principles 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 for 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).
CONFIDENTIAL