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that growth has resulted in a rapid rise in taxation receipts (from M1808 in 1970/71 to an estimated SM3612 in 1975/76); that political uncertainties require a measure of discount for foreign and domestic investment; and that in the 1950's and 1960's there were non-fiscal constraints on the growth of certain kinds of social expenditure. On the other hand, it is important that self-imposed fiscal limitations should not unnecessarily restrict implementation of social policies which are essential for the balanced growth of an industrial society. It is accepted by the Hong Kong Administration that there would not be a severe loss of investment if direct taxation were raised above the 15% limit now payable by any individual and the 17% payable on Corporation profits; and that Hong Kong's strength as a commercial, banking and communications centre would continue to attract investors if
tax rates were somewhat higher. What matters most is that taxation and revenue and charges of all sorts should produce enough money for the necessary progress it should be left
to the Hong Kong Government to find it in the light of local circumstances. The Commission appointed by the Governor to examine the present tax system should report by the end of 1976 and future taxation planning can then take its recommendations into account.
5.
Another dissimilarity between Hong Kong and other
industrial societies has been reluctance to resort to deficit
financing. This in part has its origins in the requirement to obtain UK approval for borrowing which in the 1950's and 1960's was discouraged. This led to a situation in the past in which an unusually high percentage of the Government's
capital expenditure was financed from the surplus on current
account. Some overseas and local borrowing was undertaken for the first time last year to cover the deficit then expected
as a result of the fall in revenues due to the recession and
at present some further loans are being negotiated. For the
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