show that the inflationary pressures in 1988-89 are liable to be even
greater than expected.
3
ago that, and I quote:
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by 14
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365
Second, the Financial Secretary said only a year
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If the objective of low taxation is to be achieved, the growth in expenditure on public services must stay within; rather than run ahead of the expansion of our economy". I agree, but over the next two years he is planning to let consolidated account expenditure run ahead of economic growth, and the consolidated account forecasts for the following two years are set higher than they were a year ago. figures also remind us that the margin of error is inevitably greater the further ahead we try to look. Third, the Financial Secretary also said only a year ago that the size of the Civil Service remains the le. major determinant of government spending. The fact that the growth in
cap the Civil Service is expected to remain well above the target figure Le throughout is one of the most disturbing features of the medium range forecast. So the reason I am making these comments is that the trends
We should not be able in the medium term are not altogether healthy.
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to afford to increase spending any more than has already been planned unless the GDP grows much faster. I fear we may be heading back towards expenditure-led budgets from the much healthier revenue-led budgets to which this Council eventually converted the previous Financial Secretary. Perhaps this is why the Financial Secretary is so keen on a new indirect tax, not just to broaden the tax base but also to increase
But total revenue in order to meet demands for increased spending. whether we can afford to spend more is not just a question of whether Even if we have, or can raise, the revenue or reserves to pay for it. we have, we must take into account the effect on the economy if Government spending preempts a higher proportion of the economy's resources. So, unless the Financial Secretary has in mind a major switch from direct taxation to indirect taxation, I think he might as well put his form of sales tax on the back burner. In any case I think we should be proud that we have been able to sustain such a high level of expenditure with a limited range of taxes, a relatively small number of direct taxpayers and low rates. No one in Hong Kong can claim that his or her tax burden is crippling or even onerous. It is heartening to see such countries as the United Kingdom, the United States and Germany at last following our example. The case for changing this successful
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7.