XN000022-1988-04-20 — Page 2

WEDNESDAY, APRIL 20, 1988

SALES TAX WOULD REQUIRE CAREFUL STUDY

*

THE FINANCIAL SECRETARY

SHOULD NOT ACTIVELY CONSIDER

REVENUE UNLESS

INTRODUCING A SALES TAX AS A MEANS OF INCREASING

HE INTENDED TO CHANGE THE EXISTING TAX STRUCTURE, THE SENIOR MEMBER OF THE LEGISLATIVE COUNCIL, THE HON LYDIA DUNN, SAID TODAY (WEDNESDAY).

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"UNLESS THE FINANCIAL SECRETARY HAS IN MIND A MAJOR SWITCH FROM DIRECT TAXATION TO INDIRECT TAXATION, I THINK HE MIGHT AS WELL PUT HIS 'FORM OF SALES TAX' ON THE BACK BURNER, MISS DUNN SAID WHEN LEADING OFF DEBATE IN THE COUNCIL ON THE BUDGET PRESENTED ON MARCH 2.

SHE POINTED OUT THAT HONG KONG HAD BEEN ABLE TO SUSTAIN A HIGH LEVEL OF EXPENDITURE WITH A LIMITED RANGE OF TAXES, A RELATIVELY SMALL NUMBER OF DIRECT TAXPAYERS AND LOW RATES, AND THERE WAS NO SELF-EVIDENT CASE FOR CHANGING THIS SUCCESSFUL FORMULA NOW.

WAYS

"BUT IF THE FINANCIAL SECRETARY IS LOOKING FOR ADDITIONAL OF INCREASING REVENUE, LET US AT LEAST HAVE A THOROUGH REVIEW OF ALL POSSIBLE SOURCES OF REVENUE (NOT JUST A SALES TAX) SHE SAID.

+

ANY FAR-REACHING CHANGES IN THE TAX SYSTEM SHOULD BE PROPERLY CONSIDERED AND FULLY ARGUED IF THEY WERE TO OBTAIN PUBLIC ACCEPTANCE.

ADDED.

SUCH A REVIEW SHOULD INCLUDE NON-OFFICIAL

REPRESENTATION, SHE

MISS DUNN SAID SHE WAS CONFIDENT THAT HONG KONG WAS MAKING GOOD PROGRESS UNDER FULL SAIL THROUGH CALM WATERS IN THE SHORT TERM. BUT SHE WARNED THAT THE TERRITORY MIGHT BE ENTERING "MORE CHOPPY SEAS" IN THE MEDIUM TERM.

SHE WAS CONCERNED ABOUT THE FORECAST TRENDS OVER THE PERIOD UP TO 1991-1992 WHICH WERE "NOT ALTOGETHER HEALTHY"

A NUMBER OF KEY INDICATORS IN THE FORECAST SEEMED TO SHOW THAT THE INFLATIONARY PRESSURES IN 1988-89 WERE LIABLE TO BE EVEN GREATER THAN EXPECTED.

THE INDICATORS ALSO SUGGESTED THAT OVER THE NEXT TWO YEARS, THE FINANCIAL SECRETARY WAS PLANNING TO LET CONSOLIDATED ACCOUNT EXPENDITURE RUN AHEAD OF ECONOMIC GROWTH.

BUT THE MOST DISTURBING FEATURE OF THE MEDIUM RANGE FORECAST WAS THAT THE GROWTH IN THE CIVIL SERVICE WAS EXPECTED TO REMAIN WELL ABOVE THE TARGET.

"WE SHALL NOT BE ABLE TO AFFORD TO INCREASED SPENDING ANY MORE THAN HAS ALREADY BEEN PLANNED UNLESS THE GDP GROWS MUCH FASTER,' SHE SAID.

"

/SHE WARNED