XN000022-1991-02-03 — Page 3

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SUNDAY, FEBRUARY 3, 1991

"REVENUE FROM FEES AND CHARGES NOW DOES KEEP PACE WITH INFLATION AND CAN THUS BE ESTIMATED WITH SOME CONFIDENCE.

• "WE

ALSO ENDEAVOUR TO ENSURE THAT THERE IS NO MAJOR SHIFT IN THE TAX BURDEN EXCEPT AS A DELIBERATE ACT OF POLICY, HE SAID.

PL

THE BULK OF TOTAL REVENUE WAS, HOWEVER, INTERNAL REVENUE LOR TAXES), AND THE YIELD WAS GREATLY INFLUENCED BY THE ACTUAL PERFORMANCE OF THE ECONOMY, HE SAID.

" IT

IS NOT EASY TO FORECAST REVENUE YIELDS FROM TAXATION THE PERFORMANCE OF A SMALL AND OPEN ECONOMY SUCH AS THAT OF HONG KONG TENDS TO BE VOLATILE.

BECAUSE

"BUT WE ARE CONTINUING TO REFINE OUR FORECASTING SYSTEMS AND WE ARE CERTAINLY GETTING BETTER, HE SAID.

++

IN RELATION TO BUDGETARY STRATEGY, SIR PIERS IMPORTANT TOOL WAS THE MEDIUM RANGE FORECAST MODELLING SYSTEM LOOKING AHEAD FOR FIVE YEARS.

SAID THE MOST A COMPUTERISED

"IN A NUTSHELL, WHAT WE DO THROUGH THE MEDIUM RANGE FORECAST IS ΤΟ KEEP A RECORD OF WHAT WE ARE ALREADY COMMITTED то BY WAY OF ESTABLISHED LEVELS OF SERVICE; THE GROWTH IN DEMAND FOR THOSE SERVICES; AND THE CONSEQUENCES OF EARLIER DECISIONS.

**THE

BUDGET STRATEGY DETERMINES THE TOTAL ACCEPTABLE LEVEL OF EXPENDITURE. THE DIFFERENCE BETWEEN THIS AND KNOWN COMMITMENTS IS AVAILABLE FOR NEW ACTIVITIES AND IMPROVEMENTS IN EXISTING ACTIVITIES," HE SAID.

SIR PIERS POINTED OUT THAT AS THE ACCEPTABLE LEVEL OF EXPENDITURE IN THE FORECAST PERIOD IS RELATED TO AND LIMITED BY ASSUMED ECONOMIC GROWTH, IT IS INDEPENDENT OF REVENUE AVAILABILITY.

"IT FOLLOWS THAT IF REVENUE LEVELS PROJECTED ACCORDING TO CURRENT FISCAL POLICY CAN FUND THAT LEVEL OF EXPENDITURE AND PRODUCE BIGGER THAN NEEDED BUDGET SURPLUSES, THE LOGICAL RESPONSE IS INCREASE EXPENDITURE BUT EITHER TO TOP UP OUR RESERVES ANTICIPATED FUTURE COMMITMENT, OR TO REDUCE TAXATION.

"IN THE PAST FEW YEARS, WE HAVE FORTUNATELY BEEN ACHIEVE BOTH, SIR PIERS ADDED,

NOT TO ΤΟ MEET

ABLE ΤΟ

PLANNING

EARLIER, SIR PIERS OUTLINED THE CHANGES IN BUDGETARY OVER THE YEARS AND POINTED OUT THAT IN THE LATTER PART OF THE 1970's, THERE WAS A DELIBERATE POLICY TO ALLOW THE RELATIVE SIZE OF THE PUBLIC SECTOR TO INCREASE OVER TIME IN RESPONSE TO THE GROWTH OF THE ECONOMY,

+

INDEED, THE GUIDELINE RATE OF GROWTH OF PUBLIC SECTOR OF GROSS DOMESTIC RECESSION IN THE MID-

EXPENDITURE WAS SET ABOVE THE TREND GROWTH RATE PRODUCT AS A COUNTERWEIGHT TO THE EFFECT OF THE 1970'S.

/"AS A