WEDNESDAY, MARCH 18, 1987
MISS DUNN NOTED THAT HONG KONG WAS GUIDED BY THREE ADDITIONAL PRINCIPLES: THAT THE GENERAL LEVEL OF TAXATION SHOULD BE KEPT LOW; THAT THE SYSTEM SHOULD BE SIMPLE TO ADMINISTER, AND THAT IT SHOULD BE EASY TO UNDERSTAND.
NO TAX SYSTEM COULD BE FAIR TO EVERYONE, SHE SAID. +SO LONG AS THE BURDEN IS NOT TOO HEAVY AND THE INEQUITIES NOT TOO GREAT, THIS IS TOLERABLE.+
SHE FELT THAT THE PRECISE RATIO BETWEEN DIRECT AND INDIRECT TAX WAS UNIMPORTANT SO LONG AS WE HAVE SOME OF BOTH AND STICK TO OUR PRINCIPLES.
+ BUT WHATEVER WE DO, I AM SURE WE SHOULD NOT IMPOSE ANY NEW TAX AT HIGH RATES NOR INCREASE AN EXISTING ONE SHARPLY.+
MISS DUNN SAID THE BRITISH EXPERIENCE WITH VALUE ADDED TAX (VAT) HELD A LESSON FOR HONG KONG, AND SHE DID NOT BELIEVE THAT HONG KONG SHOULD HAVE ANYTHING LIKE IT.
SHE DESCRIBED IT AS A +DEMORALISING TAX+ WHICH WAS VERY UNPOPULAR AND WIDELY AVOIDED BY MEANS OF UNRECORDED TRANSACTIONS, EVEN BY OTHERWISE LAW-ABIDING PEOPLE.
ON THE BUDGET GENERALLY, MISS DUNN WELCOMED THE FINANCIAL SECRETARY'S STATEMENT THAT A STRATEGY FOR THE MEDIUM TERM IS ESSENTIAL TO THE STABILITY OF THE GOVERNMENT'S FINANCES AND THE STEADY DEVELOPMENT OF THE ECONOMY.
SHE AGREED THAT BALANCED BUDGETS WERE NOT ENOUGH, AND REITERATED THAT THE AIM MUST BE TO MAINTAIN THE REAL VALUE OF OUR RESERVES. TO DO THAT,
TO DO THAT, WE MUST AIM AT STEADILY INCREASING ANNUAL SURPLUSES, SHE SAID, NOTING THAT OUR CONTINGENT LIABILITIES TOTAL ABOUT $25 BILLION.
MISS DUNN NOTED THAT CAPITAL EXPENDITURE HAD FALLEN BY ABOUT 20 PER CENT OVER THE LAST THREE YEARS, WHILE RECURRENT EXPENDITURE CONTINUED TO GROW. SHE WAS GLAD THAT THE FINANCIAL SECRETARY WAS NOW PROVIDING FOR AN INCREASE IN THE PACE AT WHICH WE ARE TACKLING OUR LONG LIST OF OUTSTANDING PROJECTS.
ON THE FINANCIAL SECRETARY'S PROPOSAL TO RAISE THE $30 BILLION BORROWING LIMIT OF THE EXCHANGE FUND FROM ANY ONE SOURCE, MISS DUNN SUGGESTED THAT IT WOULD BE MORE ACCEPTABLE TO SET THE LIMIT ABOVE $30 BILLION FOR HONG KONG GOVERNMENT FUNDS ONLY OR TO EXPRESS THE LIMIT AS A PERCENTAGE OF THE EXCHANGE FUND'S HOLDINGS.
MISS DUNN ALSO QUESTIONED THE FINANCIAL SECRETARY'S ARGUMENT THAT HE HAD ADOPTED THE PRINCIPLE THAT DUTY RATES SHOULD BE MAINTAINED IN REAL TERMS.
/+WHEN ADDITIONAL