XN000022-1988-05-04 — Page 4

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WEDNESDAY, MAY 4, 1988

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"IN PARTICULAR, THE VALUE OF

CONTRIBUTIONS MADE IN EARLIER YEARS TO THE HOME OWNERSHIP FUND HAS BEEN TRANSFERRED BACK TO GENERAL REVENUE ACCOUNT, MR JACOBS EXPLAINED.

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HOUSING

"THE REMAINING BALANCE ON THE FUND WILL PASS ΤΟ THE AUTHORITY AS PART OF ITS INITIAL CAPITAL UNDER THE NEW ARRANGEMENTS.

"THE AMOUNT DRAWN BACK INTO GENERAL REVENUE ACCOUNT IS JUST UNDER $1 BILLION. THE RESULT 19 TO INFLATE THE GENERAL REVENUE ACCOUNT SURPLUS BY THAT AMOUNT AND ΤΟ REDUCE FUND BALANCES

CORRESPONDINGLY."

WHILE NOTING THAT SOME OF THESE ADJUSTMENTS WERE ONE-OFF AND HAD NO IMPLICATIONS BEYOND 1987-88, MR JACOBS SAID THE BOOST TO PROFITS TAX RECEIPTS, HOWEVER, WAS A FURTHER INDICATION THAT HONG KONG'S ECONOMY SURVIVED THE PRESSURES OF THE STOCK MARKET CRASH RELATIVELY UNSCATHED.

THIS WAS ALSO A HOPEFUL SIGN FOR FURTHER REVENUE YIELD IN 1988-89, HE SAID.

IMPROVEMENT

IN

MR JACOBS SAID

ON THE TECHNICALITY OF MAKING FORECASTS, FORECASTING HAD BECOME PECULIARLY DIFFICULT IN THE FACE OF GLOBAL EVENTS OF SUCH MAGNITUDE AS THOSE OF LAST OCTOBER.

WHILE CONCEDING THAT PROFITS TAX WAS INEVITABLY A MORE VOLATILE ELEMENT OF REVENUE, HE SAID THE GOVERNMENT WAS UNDERTAKING A REVIEW TO IMPROVE REVENUE PROJECTIONS IN THIS AREA.

"THE DIFFICULTY WE FACE IN FORECASTING PROFITS TAX REVENUE IS THAT THE BULK OF RECEIPTS COME IN OVER THE LAST FFW MONTHS OF THE FISCAL YEAR, HE EXPLAINED.

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AGREEING WITH A MEMBER'S VIEW THAT THE UNEXPECTED CONSOLIDATED SURPLUS WAS NOT AN OCCASION FOR GREAT REJOICING, MR JACOBS ADDED THAT FOR THE REASONS HE HAD MENTIONED, HE DID NOT BELIEVE THAT EVEN IN THE LIGHT OF THIS ADDITIONAL SURPLUS FURTHER TAX REDUCTIONS SHOULD HAVE BEEN PROPOSED.

"IT IS MORE APPROPRIATE THAT THE ADDITIONAL AMOUNT SHOULD BE USED TO BUILD UP OUR FISCAL RESERVES.

"IN THIS CONNECTION, MEMBERS WILL RECOLLECT THAT IN MY BUDGET SPEECH I POINTED OUT THAT OVER THE MEDIUM RANGE FORECAST PERIOD THE RESERVE BALANCES WILL FALL AS A PERCENTAGE OF ANNUAL SPENDING FROM ABOUT 77 PER CENT TO 65 PER CENT," HE SAID.

ON THE EXPENDITURE OUT-TURN FOR THE YEAR, MR JACOBS SAID INDICATIONS WERE THAT THIS HAD BEEN MUCH AS EXPECTED AND THE VARIATION FROM THE REVISED EXPENDITURE ESTIMATES TABLED ON MARCH 2 SHOULD BE CONSIDERABLY LESS THAN ONE PER CENT.

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