XN000022-1983-03-23 — Page 10

WEDNESDAY, MARCH 23, 1983

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GOVERNMENT URGED TO CUT TAX ON HK DOLLAR DEPOSITS

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DR THE HON HENRY HU CALLED ON THE GOVERNMENT TO RAISE INTEREST TAX ON FOREIGN CURRENCY DEPOSITS TO FIVE PER CENT AND REDUCE THAT ON HONG KONG DOLLAR DEPOSITS FROM TEN TO FIVE PER CENT IN THE HOPE OF BOOSTING THE VALUE OF THE LOCAL CURRENCY.

HE MAINTAINED THAT THIS CHANGE WOULD NOT CAUSE GREAT LOSS OF REVENUE OR OUTFLOW OF FOREIGN CURRENCY DEPOSITS FROM HONG KONG.

+ SHOULD THINK THE MOVE WOULD BRING MORE REVENUE TO THE GOVERNMENT AND MORE BENEFIT TO OUR INDUSTRIES, HE SAID.

DR HU NOTED THAT SINCE THE ABOLITION OF INTEREST TAX ON FOREIGN CURRENCY DEPOSITS IN HONG KONG, THE TOTAL AMOUNT OF SUCH DEPOSITS MORE THAN DOUBLED LAST YEAR.

BUT THE VALUE OF HONG KONG DOLLAR DENOMINATED TIME, CALL AND NOTICE DEPOSITS WITH BANKS AND DEPOSIT-TAKING COMPANIES DECLINED FROM ABOUT $73 BILLION AT THE END OF FEBRUARY 1982 TO $59 BILLION AT THE END OF DECEMBER 1982.

SAVING DEPOSITS WHICH ARE NOT SUBJECT TO TAX, HOWEVER, HAVE INCREASED FROM $48.3 BILLION TO $61.9 BILLION.

+ IT WOULD BE REASONABLE TO ASSUME THAT THE GROWTH OF FOREIGN CURRENCY DEPOSITS IN HONG KONG HAS BEEN PARTLY AT THE EXPENSE OF HONG KONG CURRENCY DEPOSITS WHICH ARE BEING UNEQUALLY TREATED,* DR HU SAID.

+ THE UNEQUAL TREATMENT IS NOT WITHOUT SIDE EFFECTS.

+IT LEADS TO A WEAKENED LOCAL CURRENCY WHICH WILL JEOPARDISE HONG KONG DOLLAR'S POSITION AS A MEANS OF INTERNATIONAL PAYMENT AND, MORE IMPORTANTLY, IT WILL REACTIVATE THE ONLY NEWLY HARNESSED INFLATION.

TURNING TO THE MANUFACTURING AND EXPORT SECTOR, DR HU FELT THAT ONE OF THE KEYS TO HELP HONG KONG'S INDUSTRIES IS TO INCREASE THE COMPETITIVENESS OF THEIR PRODUCTS IN THE WORLD MARKET, BOTH IN TERMS OF QUALITY AND PRICES.

HE ACKNOWLEDGED THAT THE INCREASE IN INITIAL DEPRECIATION ALLOWANCE AND THE DEDUCTION OF THE ACQUISITION COST OF PATENT RIGHTS TAX THIS YEAR SHOULD GO SOME WAY TOWARD ALLEVIATING THE FINANCIAL BURDEN OF THOSE ENTERPRISING INDUSTRIALISTS.

HOWEVER, HE SAID, THIS IS NOT SUFFICIENT.

+1 HOPE THAT SOME MORE POSITIVE MEASURES SUCH AS RESEARCH CENTRES, GUIDANCE SERVICE AND INFORMATION FACILITIES, ETC. CAN BE PROVIDED TO THEM.

+IT WOULD ALSO BE OF GREAT HELP IF GOVERNMENT COULD ENCOURAGE THE BANKING SECTOR TO PROVIDE LOANS OF LOW INTEREST RATE TO SMALL AND MEDIUM SIZE FACTORIES.+

HE

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