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I understand that there is only one area in the Bill where the Administration and some Members have different views, that is, the proposed increase in light diesel oil duty, and the Honourable Miriam Lau will move a Committee stage amendment to abolish the increase. I strongly urge Members not to support the amendment. My reasons are as follows.
First, we have proposed various revenue concessions and increases in tax and duty in the Budget. These measures have to be taken as a package. Otherwise, the careful balance which we have strived to achieve in the Budget would be lost.
Duty is an important source of revenue, constituting an estimated 5.5 per cent of recurrent revenue in 1996-97. The proposed fuel duty increase is an integral part of the entire Budget package. Together with other proposed increases, it enables us to fund the various revenue concessions announced in the Budget. The increase in light diesel oil duty is an important element in the proposed fuel duty increase, contributing an estimated $170 million in additional revenue in 1996-97. The revenue concessions in the Budget, which were well received by this Council and the community, were proposed on the basis that all the tax and duty increases announced in the Budget, including the light diesel oil duty increase, would be passed.
Second, there have at various times been suggestions that we might end up with a surplus rather than a deficit in 1995-96 and that we would achieve a greater surplus in 1996-97 than what is estimated in the Budget. Therefore, we could afford to drop the proposed light diesel oil duty increase. I must point out that these are entirely speculations made without any valid grounds. While the accounts for 1995-96 have yet to be closed, latest indications are that we would end up with a deficit of not less than $2.5 billion as forecast in the Budget. As for 1996-97, the estimate of a surplus of $1.6 billion is the best we could make at the moment. Given total estimated Government expenditure of $194.1 billion and revenue of $195.7 billion, this is effectively a balanced budget. It would be most unwise at this early stage, and would send entirely the wrong signal both locally and overseas, if we were to consciously put that modest surplus at risk.
Third, the proposed 9 per cent increase is broadly in line with inflation. This is consistent with our policy to maintain the real value of the duty and a stable revenue well below 0.02 source. The impact of the increase on inflation is minimal percentage point.
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