In future years, the fund will increase further, through its share of revenue from land sales and the returns from its investments.
REVENUE PROPOSALS
72.
In shaping my revenue proposals, I have not focussed exclusively on the need to raise more revenue. I have taken into account the need to reduce our dependence on relatively volatile sources of revenue. I have also sought not to add to inflation, and through carefully selected tax concessions, to provide a measure of relief to the ordinary taxpayer. The overall effect of my specific proposals is effectively neutral on the CPI(A), whilst some of the other measures such as zero growth in the civil service, budgetting for a surplus and the planned borrowing - are mildly deflationary.
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73. I have also had very much in mind the need to plug tax loopholes whenever they appear. Hong Kong's low, simple and predictable tax regime is crucial to its successful business environment. But this commitment to a generous tax climate should not be misunderstood. Extensive tax avoidance is a clear breach of the spirit of our liberal tax arrangements and is not acceptable. Nor of course is tax evasion. Those who profit from their operations or residence here must accept their obligation to make a contribution to the community through our far-from-onerous taxes and duties.
74. One area which now demands action is the Vehicle First Registration Tax. There is increasing evidence that some importers are artificially depressing the import price of vehicles to reduce their tax liability. This may be costing several hundred million dollars a year in lost revenue. A Bill will be introduced into this Council as soon as possible to end this abuse.
75.
Members are also aware that we are preparing measures to prevent speculators from avoiding stamp duty on property transactions through the device of land-holding companies. I want to repeat my message: the taxes will remain low, but where they exist they must be paid.
New Revenue Measures
76.
Let me now turn to my new revenue measures. These will yield about $2.9 billion for 1992-93, and about $3.8 billion in a full year. I am also proposing five concessions, which will cost $1.8 billion for 1992-93, and about $2.1 billion in a full
year.
Corporate Profits Tax
77. My first proposal is to increase corporate profits tax from 16.5% to 17.5%, applicable to assessments for 1992-93. This will yield $850 million in 1992-93, rising to $1.6 billion in a full year. The new rate will be below the historical high of 18.5% reached in 1984-85 and represents a modest increase. It will have no appreciable impact on either local or international enthusiasm for investment in Hong Kong.
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