XN000022-1984-03-28 — Page 19

WEDNESDAY, MARCH 28, 1984

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THE FIRST POINT HE MENTIONED WAS THAT +GOVERNMENT'S FINANCIAL ARRANGEMENTS HAVE INFLATED THE DEFICIT+.

+1 HAVE RESERVATIONS ABOUT EXCESSIVE FUNDS BEING RESERVED UNDER INDIVIDUAL HEADS OF EXPENDITURE OR FUND, HE SAID.

*ONE OF THE IMPORTANT FUNCTIONS OF GOVERNMENT'S GENERAL FISCAL RESERVE IS ALREADY TO MEET UNFORESEEN NEEDS, AND IT IS REALLY NOT NECESSARY TO RETAIN EXCESSIVE RESERVE FUNDS AGAIN UNDER INDIVIDUAL HEADS OF EXPENDITURE OR FUNDS, FOR THIS WILL VIRTUALLY LEAD TO AN INFLATED DEFICIT, RESULTING IN THE NEED FOR RAISING OF FURTHER TAXES BY THE GOVERNMENT, HE ADDED.

HE CITED AS AN EXAMPLE THE CAPITAL WORKS RESERVE FUND.

HE BELIEVED THAT THERE WAS NO NEED FOR THE GOVERNMENT TO TRANSFER AS MUCH AS $7.3 BILLION TO THE FUND EVEN THOUGH MONEY MUST BE RETAINED IN THE FUND TO OFFSET THE ADVANCE OF $1.45 BILLION TO THE CONSORTIUM FOR THE DEVELOPMENT OF TIN SHUI WAI,

HIS REASON WAS THAT THIS SUM OF SOME $1.4 BILLION WOULD ONLY BE PAID IN STAGES AND NOT IN ONE GO AND THEREFORE IT SEEMED UNNECESSARY TO TRANSFER THE FULL AMOUNT TO THE FUND IMMEDIATELY.

+THE PRESENT FINANCIAL ARRANGEMENTS RESULT IN A SUM OF ABOUT $2.2 BILLION OF PUBLIC MONEY LYING IDLE IN THE FUND WHICH IS UNLIKELY TO BE USED IN FULL EVEN IN CASE OF UNFORESEEN NEEDS.

+ IF HALF OF THIS SUM WERE TRANSFERED BACK TO THE GENERAL REVENUE ACCOUNT, THE ESTIMATED DEFICIT OF SOME $3 BILLION FOR 1984-85 COULD BE REDUCED BY NEARLY ONE-THIRD, + HE ARGUED.

HE WENT ON TO SAY THAT THE BUDGET HAD OVERLOOKED THE INTERESTS OF THE MIDDLE-INCOME CLASS.

HE SAID THAT MANY PEOPLE EARNING MORE THAN $10 000 A MONTH WERE REGARDED AS BELONGING TO THE MIDDLE-INCOME CLASS BUT IN FACT THEIR SO-CALLED +HIGH SALARIES+ WERE THE RESULT OF HIGH INFLATION RATES IN RECENT YEARS.

+INFLATION HAS RAISED THE IR SALARIES, AS WELL AS THE IR EXPENDITURE. IT IS THEREFORE INAPPROPRIATE TO REGARD THEM AS REALLY WELL-PAID PEOPLE, HE SAID.

HE NOTED THAT SOME SUCH PEOPLE WOULD HAVE TO BEAR A HIGHER RATE OR EVEN THE HIGHER STANDARD RATE IN THE PAYMENT OF INCOME TAX.

+THEY ENJOY FEW DIRECT BENEFITS IN SOCIAL SERVICES, SUCH AS PUBLIC HOUSING OR WELFARE ALLOWANCES, BUT THEY HAVE TO PAY INCOME TAX AT THE SAME RATE AS THOSE WHOSE INCOMES ARE MULTIPLES OF THE IRS, HE SAID.

HE SAID THE SITUATION REFLECTED THAT THERE WERE PROBLEMS IN THE PRESENT INCOME TAX SYSTEM IN THAT PEOPLE WHOSE INCOME ARE NOT GENUINELY HIGH ARE CAUGHT INTO THE NET OF STANDARD RATE.

+ IN OTHER