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progress; and that the burden should fall more heavily on those best able to bear it. 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 1950s and 1960s 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 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 future the Hong Kong Government does not exclude further recourse to the market, as required, and subject to satisfactory terms being available. The Hong Kong Government's ability to borrow
is of course affected by its residual liability in respect of the Mass Transit Railway amounting to HK$5,600 million in 1981.
Moreover, a vital consideration is that the Colony should retain
its reputation for financial soundness given the question mark that overhangs the Colony's political future.
6. Hong Kong has not created for itself the tools of fiscal
and monetary management normal elsewhere. For instance there is no central monetary authority. However, there has been official concern in the United Kingdom over a possible conflict of interest
between the Hong Kong and Shanghai Banking Corporation's
commercial activities and its role as Government Banker.
The
recent establishment of a Monetary Affairs Officer may have gone
some way to meet this concern.:: However, there appears to be
room for a further examination of the relationship between the Hong Kong Government and the banks. [The basic philosophy has also inhibited the Government from requiring comprehensive financial (and industrial) statistics.]
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