XN000022-1987-03-18 — Page 4

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WEDNESDAY, MARCH 18, 1987

MR JACOBS ALSO NOTED THAT IN CONSIDERING APPLICATIONS FROM FOREIGN BANKS, DISCRETION WOULD BE EXERCISED BY THE EXECUTIVE COUNCIL ON A CASE-BY-CASE BASIS, WHERE THE APPLICANT WAS OF UNDOUBTED STANDING, AND WHERE GRANTING A LICENCE TO THE APPLICANT WOULD SERVE HONG KONG'S INTEREST AS A BROAD-BASED INTERNATIONAL FINANCIAL CENTRE TAKING ACCOUNT OF THE REPRESENTATION IN HONG KONG BY BANKS FROM THE APPLICANT BANK'S COUNTRY.

NEED TO PRESERVE AND FOSTER FAVOURABLE ECONOMIC ENVIRONMENT

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HONG KONG'S ECONOMIC GROWTH DEPENDS ON THE ENTERPRISE, SKILL AND SHEER HARD WORK OF EVERYONE INVOLVED IN OUR ECONOMY - NOT JUST ON SOUND FINANCIAL MANAGEMENT, THE SENIOR MEMBER OF THE LEGISLATIVE COUNCIL, THE HON LYDIA DUNN, SAID TODAY (WEDNESDAY).

+WE CAN HAVE EVERY CONFIDENCE IN OUR FUTURE SO LONG AS THE GOVERNMENT CONTINUES TO PRESERVE AND FOSTER AN ECONOMIC ENVIRONMENT FAVOURABLE TO ENTERPRISE, INVESTMENT, JOB CREATION AND WEALTH CREATION, SHE SAID.

MISS DUNN WAS LEADING THE DEBATE ON THE PROPOSED BUDGET.

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RESPONDING TO THE FINANCIAL SECRETARY'S INVITATION FOR COMMENTS ON THE RELATIVE MERITS OF DIRECT AND INDIRECT TAXATION MISS DUNN EMPHASISED THAT PRINCIPLE AND PRACTICE MUST BE CONSIDERED TOGETHER.

THE PRINCIPLE BEHIND DIRECT TAXATION IS THAT PAYMENT SHOULD BE RELATED TO ABILITY TO PAY, SHE SAID, AND THAT BEHIND INDIRECT TAXATION IS THAT PAYMENT SHOULD BE RELATED TO CONSUMPTION.

A THIRD PRINCIPLE -- THAT EVERY CITIZEN SHOULD MAKE SOME CONTRIBUTION TOWARDS THE PUBLIC EXPENDITURE FROM WHICH ALL BENEFIT -- GENERALLY LEADS TO GOVERNMENTS ADOPTING A MIXTURE OF DIRECT AND INDIRECT TAXES.

IF ALL TAXATION IS INDIRECT, SHE SAID, THERE WOULD BE TOO HEAVY A BURDEN ON THE POOR FOR IT WOULD NOT BE POSSIBLE TO RAISE ENOUGH REVENUE BY TAXING ONLY LUXURIES. ON THE OTHER HAND, IF TAXATION WAS ALL DIRECT THEN MANY PEOPLE WOULD MAKE NO CONTRIBUTION BECAUSE IT WAS UNECONOMIC TO COLLECT DIRECT TAX ON

SMALL INCOMES.

/MISS DUNN