XN000022-1993-03-04 — Page 31

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THURSDAY, MARCH 4, 1993

FS:

I THINK PROBABLY MOST OF THE PUBLIC WERE NOT TERRIBLY AWARE THAT WHEN THEY BOUGHT THEIR CREAM FOR THEIR FACES AND SO ON, THAT THAT WAS TAXED, BUT I THINK THEY WILL NOTICE THE BENEFIT WHEN THE TAX IS REMOVED. THE INDUSTRY HAS AGREED TO CUT PRICES BY 10-12 PER CENT. BUT AS WELL AS THE DOMESTIC CONSUMER I MUST SAY I ALSO HAD IN MIND THE VISITORS, THE TOURISTS, WHO SPEND A LOT OF MONEY HERE WHICH BENEFITS ACTUALLY THE WHOLE COMMUNITY, AND I WANTED TO KEEP SHOPPING OF COSMETICS, AMONG OTHER THINGS, AS STILL AN ATTRACTION FOR TOURISTS, SO I HAD BOTH GROUPS IN MIND.

KIT CUMMINGS: CAN I JUST FOLLOW THAT ONE UP TOO. WE HAD CRITICISM ON 'HONG KONG TODAY' EARLIER, THAT WHEREAS MOST FINANCIAL SECRETARIES HAVE BEEN SAYING WB NEED TO WIDEN THE TAX

BASE, AS A SORT OF PHILOSOPHICAL POINT OR A PRACTICAL WAY AHEAD, IN FACT WHAT YOU ARE DOING IS TO NARROW THE TAX BASE.

FS: THIS. OVERDONE.

THAT IS TRUE. THERE HAS BEEN A LONG-STANDING DEBATE ON

I THINK, MYSELF, THE THEORETICAL ARGUMENTS ARE SOMEWHAT THE ARGUMENT, HISTORICALLY, HAS BEEN IN TERMS OF DIRECT AND INDIRECT AND THE BENEFITS OF INCREASING THE REVENUE FROM INDIRECT TAXATION BECAUSE IT IS LESS VOLATILE. ACTUALLY, IT IS NOT QUITE TRUE, IT ALL DEPENDS ON THE TAX. FOR INSTANCE SALARIES TAX WHICH IS A DIRECT TAX IS A RATHER RELIABLE TAX AND OF COURSE IT TENDS TO GO UP RATHER NICELY WITH INFLATION, WHEREAS AN INDIRECT TAX LIKE STAMP DUTY IS EXTREMELY VOLATILE. SO I THINK THE ARGUMENT HAS PROBABLY GOT A LITTLE BIT CARRIED AWAY WITH ITSELF. I THINK THERE WERE GOOD THEORETICAL REASONS FOR PROPOSING THE INTRODUCTION OF A SALES TAX, BUT THERE ARE GOOD POLITICAL REASONS WHY WE ARE NOT ABOUT TO DO IT.

QUESTION:

DO YOU MEAN THAT BEFORE 1997, YOU WILL NOT CONSIDER MAKING INDIRECT TAX AS THE MAJOR SOURCE OF INCOME IN HONG KONG?

NOT AND

FS:

WELL, WE LIKE TO KEEP OUR OPTIONS OPEN, SO I AM GOING ΤΟ COMMIT MYSELF TO WHAT IS GOING TO HAPPEN BETWEEN NOW 1997. BUT I THINK I HAVE SAID FAIRLY CLEARLY THAT THE SALES TAX IN PARTICULAR, WE WILL HAVE TO BE ABLE TO PERSUADE PEOPLE THAT WE HAD A REAL NEED TO INTRODUCE THAT TAX AND I DON'T BELIEVE THAT I COULD DO THAT AT THE MOMENT.

QUESTION:

THE

THE

IS

IN

GOOD MORNING FINANCIAL SECRETARY. IN RECENT YEARS, HONG KONG GOVERNMENT HAS BEEN PRODUCING TIGHT BUDGETS, THEREFORE PAY FOR CIVIL SERVANTS HAS BEEN DEPRESSED BY SOME 3.5 PER CENT, IT WELL KNOWN TO THE PUBLIC IN HONG KONG. BUT DO YOU UNDERSTAND THAT THE PAST ONE OR TWO YEARS, THE MORALE OF THE CIVIL SERVANTS, IN MY OPINION, HAS BEEN AFFECTED TO QUITE SOME EXTENT? NOW THAT WE HAVE SUCH A LARGE SURPLUS THIS YEAR, I WONDER IF YOU WOULD HONOUR THE PROMISE OF RETURNING THAT 3.5 PER CENT TO CIVIL SERVANTS?

/FS