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The Deficit
There are some suggestions that we might have deferred to 1996-97 the revenue proceeds from some land sales, so as to create a budget deficit for 1995-96 and a budget surplus in the subsequent year. I think there is some misunderstanding over this, so let me explain the sharing arrangement for land revenue and aim to clarify the matter once and for all.
In accordance with the arrangement agreed in the Sino-British Land Commission, land premium upon receipt will first be deposited in the Suspense Account of the Capital Works Reserve Fund. Each quarter, after deduction for the average cost of land production, the premium income received in the preceding quarter is shared between the Hong Kong Government and the future Hong Kong Special Administrative Region Government. Thus, we will only receive in the first quarter of 1996-97 our share of the premium income from sites disposed of in the last quarter of 1995-96. In accordance with our accounting convention, such receipts are rightly counted as revenue for 1996-97. The same arrangement applied to the land premium received in the last quarter of 1994-95, and the year before and so on.
This sharing arrangement has been in use for many years and is well known. It is not the reason for the budget deficit in 1995-96, nor for the forecast surplus in 1996- 97. Sir Hamish said in his Budget Speech in 1995 that only in 1995-96, when our investment in the Airport Core Programme peaked, would it be necessary to draw on our reserves. This has proved correct and our latest outturn forecast, announced by the Financial Secretary in his Budget Speech this year, merely reflects this.
Rates
I now turn to a number of revenue issues on which Members have commented on extensively. First, rates. There are two issues here which I wish to address the routine general revaluation and the proposal of annual revaluation.
On the routine general revaluation, I should emphasise that our aim is to adjust the rateable value of properties on a regular basis in order to reflect up-to-date rentals in the market. This is necessary if we are to maintain rates as a stable revenue source and to keep a fair and equitable distribution of the rates charged. We will therefore conduct the normal three-yearly general revaluation in 1996-97, with any changes in rateable values to take effect from 1 April 1997. We will consider if it is necessary to introduce a suitable rates relief scheme in order to cushion the effect of the revaluation on those who may experience a large increase in the rateable value of their properties.