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The seven revenue virtues of public finances
The Government will continue to adhere to the seven revenue principles upon which Hong Kong's public finances have been based for many years, the Financial Secretary, Mr Donald Tsang, said today (Monday).
Speaking at the luncheon of the Hong Kong Economic Association, Mr Tsang said these seven revenue virtues had brought Hong Kong to its present level of success and would continue to do so in future.
The seven revenue principles outlined by Mr Tsang are the "living-within-our- means" rule; maintaining adequate fiscal reserves; a low, simple and predictable tax system; a rigorous user-pays system for fees and charges to underpin the low tax regime; combating tax avoidance and tax evasion; providing tax concessions where most needed and; avoiding fuelling inflation.
Mr Tsang said the "living-within-our-means" principle was the golden rule of Hong Kong's public finances.
"We ensure this in two ways: by carefully controlling the growth of government spending in line with the trend growth rate of the economy; and by adhering to the first revenue principle: to raise sufficient revenue to meet our known spending commitments," Mr Tsang said.
"Having kept a firm grip on spending, we ensure, by fine tuning the revenue system, that our revenue growth is commensurate so that we keep our budgets broadly in balance."
Mr Tsang stressed that Hong Kong must maintain adequate fiscal reserves to provide a cushion against future uncertainties. The Hong Kong Government currently maintains fiscal reserves of $151 billion.
"Hong Kong's fiscal reserves at their present level give us the assurance we need as we enter the final stages of the transition that our public spending on vital services will not be disrupted by short term fluctuations in our economy.
"The existence of reserves is also a great boost to public confidence during the transition. The bulk of the reserves are deposited within the Exchange Fund to help protect the Hong Kong Monetary Authority to protect the Hong Kong Dollar. Nothing could be more important to Hong Kong over the next few years than defending the link with the US Dollar," he stressed.