XN000022-1991-04-17 — Page 14

WEDNESDAY, APRIL 17, 1991

12

"IN CONNECTION WITH THIS SUBJECT, A NUMBER OF MEMBERS HAVE MENTIONED THE INTRODUCTION OF A CAPITAL GAINS TAX AND HAVE SUGGESTED INCREASING THE RATE OF BUSINESS PROFITS TAX.

"I DO NOT SEE THIS IN ANY WAY AS A BROADENING OF THE TAX BASE.

HE SAID. ALSO, IN MY VIEW IT WOULD BE QUITE THE WRONG WAY FORWARD,

SIR PIERS POINTED OUT THAT IF THE GOVERNMENT WAS то INCREASE THE BUSINESS PROFITS TAX RATES SIGNIFICANTLY AND ALSO INTRODUCE A CAPITAL

HONG GAINS TAX, THERE WAS NOT A SHADOW OF A DOUBT THAT

KONG WOULD CHASE TRANSACTIONS OFFSHORE AND INTO THE HANDS OF THE TERRITORY'S REGIONAL COMPETITORS.

WOULD SOURCES.

ΤΟ

"IN ADDITION, AS I HAVE STRESSED SO MANY TIMES IN THE PAST, GREATLY INCREASE OUR RELIANCE ON THE MOST VOLATILE OF OUR

IT

TAX

SEEK

"IF,

INSTEAD OF THE MEASURES I HAVE PROPOSED, WE WERE TO ACHIEVE THE SAME EFFECT BY RAISING CORPORATE PROFITS TAX BY ONE PERCENTAGE POINT TO PRODUCE AN ADDITIONAL $730 MILLION AND BY INTRODUCING A CAPITAL GAINS TAX TO PRODUCE $2.2 BILLION, WE WOULD HAVE SWUNG OUR RELIANCE ON DIRECT TAXATION FROM A RATIO OF 60:40 TO ABOUT 64:36.

"THIS WOULD LEAVE US MORE VULNERABLE TO THE EFFECTS OF A RECESSION ELSEWHERE, OVER WHICH WE HAVE NO CONTROL AT ALL.

"THIS COULD SEVERELY HANDICAP OUR ABILITY TO MEET OUR RECURRENT REVENUE NEEDS," THE FINANCIAL SECRETARY SAID.

SIR PIERS POINTED OUT THAT AFTER HEARING SOME OF THE COMMENTS

HE MADE IN THE LEGISLATIVE COUNCIL, HE WAS LESS CONFIDENT THAN

WAS THAT THIS POINT HAD BEEN FULLY UNDERSTOOD.

NOTED HE

THAT THERE APPEARED TO BE SOME ALARM ABOUT THE COMMENTS POSSIBLE IMMINENT INTRODUCTION OF A SALES TAX, FOLLOWING THE HE MADE AT HIS PRESS CONFERENCE AFTER THE BUDGET SPEECH.

"AT THAT CONFERENCE, I WAS AT PAINS TO AVOID SETTING OUT A

BUT

ΤΟ CERTAIN REPORTERS DECIDED, IMAGINATIVELY,

GIVE TIMETABLE

A

TIMETABLE OF THEIR OWN.

"IF IT WERE INTRODUCED, 1 ACCEPT THAT A SALES TAX WOULD ADD SOMETHING TO THE CONSUMER PRICE INDICES (CPI), ALTHOUGH THIS WOULD BE ONE-OFF ADDITION, SINCE THERE SHOULD BE NO NEED FOR ANY IMMEDIATE UPWARD REVISIONS OF THE RATE OF TAX.

A

"THIS IS WHY I HAVE INDICATED THAT WHILE INFLATION IS RUNNING HIGH IT WOULD NOT BE TIMELY TO INTRODUCE A SALES TAX, HE SAID.

SIR PIERS POINTED OUT THAT WHETHER OR NOT A SALES TAX WOULD BE REGRESSIVE, AS SOME HAD SUGGESTED, WOULD DEPEND VERY MUCH ON HOW THE TAX WAS STRUCTURED.

"THERE ARE ARGUMENTS AGAINST A COMPLEX STRUCTURE DESIGNED TO ACHIEVE EQUITY, BUT AT THE END OF THE DAY WE SHALL HAVE TO SEE WHAT IS IN THE BEST INTERESTS OF HONG KONG,' HE SAID.

"1

/THE FINANCIAL