HONG KONG: 1987 BUDGET
The Budget
1.
Developments in government finances during 1986-87 were doubt well received by Mr Jacobs as his first budget drew near. Considerably more rapid than expected GDP growth raised revenue from salary and profits tax and a booming stock market increased stamp duty revenue. Total revenue was some 8% higher than foreseen at the time of the previous budget.
2. This has enabled the Financial Secretary to make revenue proposals for 1987-88 resulting in a net revenue reduction, but with still the prospect of an overall fiscal surplus on the General Revenue account, after allowing for transfers to the various capital
the Funds. (General reserves are now HK$ 20 bn, with HK$ 12 bn in various Funds.) Revenue changes for 1987-88 and for a full fiscal year as as follows:
HK$ million
Revenue increases
1987-88
+365
-690
-325
Full Year
+405
-1095
-690
Tax concessions
Net effect
Revenue changes
3. Increases on duty on motor spirit and diesel oil (maintaining their real value) will raise HK$ 60 m in 1987-88. Some rationalisation in structure of duties on 'intoxicating liquor' and preservation of real values will yield HK$ 50 m, changes in duty on tobacco, cigars and cigarettes, HK$ 55 m. Increases in various fees and charges for government services will produce HK$ 200 m (HK$ 240 m in a full year).
Taxes
4.
Mr Jacobs raised the prospect of a broader tax base, with a greater role for indirect (ie consumption) taxes, and encouraged public debate without making significant contribution to it himself. Tax changes in this budget were restricted to small reductions in both personal and corporate tax rates:
the standard rate of personal tax falls from 17% to 16.5%, with
The cost increases in allowances and the widening of one tax band. is HK$ 470 m (HK$ 650 m in a full year);
The total cost
the corporate tax rate falls from 18.5% to 18%. (including effects on unincorporated firms' taxes and property/ interest tax yields is HK$ 170 m (HK$ 385 m in a full year).
Other small concessions will cost HK$ 50 m and HK$ 60 m in a full year.
5.
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