XN000022-1985-02-27 — Page 4

WEDNESDAY, FEBRUARY 27, 1985

+THIS IS A MOST BENEFICIAL OUTCOME AND ONE OF GREAT IMPORTANCE FOR COMMUNITY WELL-BEING. PEOPLE NO LONGER FEAR ALARMING ANNUAL INCREASES IN THE COST OF LIVING, PARTICULARLY AS REAL WAGES ARE AGAIN RISING. THEY CAN ABSORB THE SLIGHTLY INFLATIONARY IMPACT OF FURTHER SELECTIVE INDIRECT TAXATION. MOREOVER, LARGE ANNUAL INFLATION-BASED PAY INCREASES ARE UNNECESSARY, SAID SIR JOHN.

THE GOVERNMENT REMAINED COMMITTED TO THE SUPPORT OF A FREE MARKET ECONOMY, HE SAID.

+TO PROVISION OF THE INFRASTRUCTURE WITHIN WHICH ENTERPRISE CAN FLOURISH WITHOUT UNNECESSARY GOVERNMENT REGULATION TO THE CARE OF THOSE WHO CANNOT CARE FOR THEMSELVES; AND TO LOW OVERALL TAXATION. HONG KONG IS NOT A TAX HAVEN, BUT WE KNOW NOT LEAST FROM THE EXPERIENCE OF OTHERS THAT MODERATION IN TAXATION IS AN ESSENTIAL SPUR TO INDIVIDUAL EFFORT. TAX AVOIDANCE IS NOT.+

SIR JOHN SAID HIS REVENUE PROPOSALS RELATED TO INDIRECT TAXATION DESIGNED TO FALL ON LUXURIES AND NOT ON ESSENTIALS.

AS AN EXAMPLE OF THE ALTERNATIVES, HE SAID AN ADDITIONAL ONE PERCENTAGE POINT TO THE PRESENT STANDARD TAX RATE OF 17 PER CENT WOULD YIELD $165 MILLION IN THE FIRST YEAR AND $290 MILLION IN A FULL YEAR. ONE PERCENTAGE POINT ON THE PRESENT CORPORATE RATE OF 18.5 PER CENT WOULD YIELD $200 MILLION AND $430 MILLION RESPECTIVELY.

+ IF MEMBERS IN THE FORTHCOMING DEBATE SEEK A LOWER DEFICIT OR GREATER TAX CONCESSIONS OR NEW PROGRAMMES, THE SIMPLE MATHEMATICS OF ALTERNATIVE DIRECT TAXATION INCREASES SHOULD AT LEAST BE KNOWN, HE SAID.

SEVEN PER CENT GDP GROWTH FORECAST

****

DEFICIT FINANCE IS A PROFLIGATE'S REFUGE, THE FINANCIAL SECRETARY, THE HON SIR JOHN BREMRIDGE, SAID AS HE WOUND UP HIS BUDGET SPEECH WITH A REVIEW OF ECONOMIC PROSPECTS FOR 1985 WHICH INCLUDED A FORECAST GROWTH RATE OF THE GROSS DOMESTIC PRODUCT OF SEVEN PER CENT.

HE SAID THAT THE ECONOMY SHOULD BENEFIT FROM EXPECTED GROWTH IN THE WORLD ECONOMY BUT THE TERRITORY REMAINED ALWAYS VULNERABLE TO EXTERNAL EVENTS. THE U.S. ECONOMY WAS EXPECTED TO EXPAND LESS RAPIDLY WITH A 3.5 PER CENT GROWTH RATE ASSUMED FOR 1985 AS COMPARED WITH THE 6.8 PER CENT RECORDED FOR 1984. THUS SOME SLOWING DOWN IN THE GROWTH RATE OF DOMESTIC EXPORTS TO THE UNITED STATES WAS LIKELY THIS YEAR.

+PROTECTIONISM EVERYWHERE IS A CONSTANT THREAT+, SAID SIR JOHN CITING THE DIFFICULTIES WITH THE CHANGE IN U.S. COUNTRY-OF-ORIGIN RULES LAST YEAR.

/CHINA WAS