FINANCE AND ECONOMY
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This accumulation of reserves has been achieved partially through a strong growth in revenue. Revenue has expanded more than 38 times from $309 million in 1951-2 to $11,766 million in 1978–9. The rate of increase has been affected by variations in such factors as the economic situation and inflows of capital, and by the introduction of an appropriations- in-aid system in 1976-7 whereby certain departmental receipts, recovered by departments in the process of providing services to the public, were used to offset approved expenditure. The upward trend has, however, been strong and continuous.
The pace of economic growth gave rise to surpluses from 1969-70 to 1973-4, with the highest surplus in these years of $640 million being achieved in 1971-2. There was a net deficit of $380 million in 1974-5, largely because of increased spending on public works, social welfare, and university and polytechnic grants. But, in subsequent years, growth resumed and the accounts again returned to surplus. In 1978–9, revenue at $11,766 million (compared with the original estimate of $9,436 million) exceeded the year's net expenditure of $10,299 million (original estimate $9,456 million) by $1,467 million. Revenue and expen- diture for 1977-8 and 1978-9, together with the estimates for 1979-80, are detailed and compared in Appendices 7 and 8. Sources of revenue and expenditure in various fields are shown proportionately by charts in Appendices 7a and 8a.
For 1979-80 the estimated revenue of $12,976 million and net expenditure of $11,542 million give an estimated surplus of $1,434 million for the year.
Public Debt
At March 31, 1979, net available public financial assets were $6,415 million, while the public debt was equivalent to some $404 million - about $81 per head of population. Indebtedness increased by some $22 million during 1978-9. This was principally due to drawings on loans from the Asian Development Bank towards the Sha Tin sewage treatment project and the Sha Tin urban development (housing) project, offset by instalment repayments of borrowings under the Asian Development Bank loan towards the Lok On Pai desalting project and under the loan from Lloyds Bank International Limited.
Other outstanding borrowings included $250 million of government 61 per cent bonds issued in 1975-6 and due in 1980, and a drawing of US$6 million (equivalent to HK$29.9 million) in January, 1978, from the Hongkong and Shanghai Bank Consortium loan facility.
Internal Revenue
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The Inland Revenue Department collects the taxes and duties making up internal revenue. These consist of earnings and profits tax, estate duty, stamp duty, entertainments tax, betting duty, hotel accommodation tax and business registration fees. The estimated yield of internal revenue in the 1979–80 financial year is $6,662 million which is about 48 per cent of Hong Kong's expected total revenue and receipts for 1979–80.
Direct Taxes
Earnings and profits tax is levied under the Inland Revenue Ordinance only upon specified sources of income arising in or derived from Hong Kong, namely, business profits, salaries, property and interest. The current standard rate of 15 per cent has been in force since April 1, 1966. Taxes on earnings and profits are expected to yield $4,990 million in the 1979-80 financial year.
Profits tax is charged on profits arising in or derived from Hong Kong from a trade or business carried on in Hong Kong. Profits of unincorporated businesses are chargeable to tax at the standard rate of 15 per cent and corporations at 17 per cent. Generally all expenses,