XN000022-1993-03-04 — Page 8

THURSDAY, MARCH 4, 1993

HOW DO THAT

YOU

THE

THE EXCHANGE FROM BILLS AND BONDS. QUESTION (CONT'D) EXPAND ON THAT, PLEASE? AND IN PARTICULAR, DOES THAT MEAN MTRC AND THE AIRPORT AUTHORITY MIGHT BE ABLE TO ISSUE BONDS?

HAVE

OF

AT

ARE

FS:

YES. I CAN'T EXPAND ON IT TECHNICALLY, YOU WOULD TO GO TO THE MONETARY AUTHORITY FOR THAT, BUT I WILL EXPAND ON IT IN A NON-TECHNICAL WAY. THE PROPOSAL IS SIMPLY THAT WE HAVE A RATHER GOOD MECHANISM IN PLACE FOR DEALING WITH THE BUYING AND SELLING OF EXCHANGE

ALL FUND

DONE BY IT'S NON-PAPER, IT'S INSTANTANEOUS, IT'S BILLS.

THE RESULT COMPUTERS, AND THERE IS A VERY LIQUID MARKET IN THEM. THAT IS THAT YOU CAN HAVE THOSE BILLS, OR WE CAN HAVE THOSE BILLS,

WHEN VERY

RATES. IF THE MTRC AND THE PAA LOW INTEREST BORROWING, AND OF COURSE THE MTRC DOES ALREADY BORROW, USE

THEY'RE NOT BECOMING EXCHANGE MECHANISM THAT ANYTHING OF THAT

THEY'RE MERELY SORT,

USING THE COMPUTER SYSTEM AND SO ON THEN THEY WOULD, ON THE FACE OF IT, A MUCH MORE LIQUID COMMODITY; THE MARKET IN THEM WOULD BE INCREASED, INTEREST IN THEM WOULD BE INCREASED, AND THEY WOULD PROBABLY BE

THAT IS THE AT A SLIGHTLY CHEAPER RATE. то BORROW DETAILS ARE BEING LOOKED AT.

QUESTION:

-

THEY WERE ABLE TO

BILLS FUND

OR THE MECHANISM,

BECOME

CONCEPT,

ABLE

NOW MR MACLEOD, I HAVE TWO QUESTIONS. HOW WOULD COMMENT ON AN OPINION THAT A BALANCED BUDGET WOULD HELP HONG KONG HAVE A SMOOTH TRANSITION INTO 1997? AND THEN ANOTHER QUESTION: GOVERNMENT HAS TALKED ABOUT BROADENING THE TAX BASE FOR YEARS, SO WOULD THIS YEAR'S BUDGET REFLECT THAT YOU CAN ACHIEVE THIS PURPOSE?

WELL BALANCED BUDGET,

- L

——

THE

YOU

TO

THE

HOW

COMMENTED

ON THIS

PS:

I THINK I'VE PROBABLY

I MEAN YOUR ON ALREADY IN THE CONTEXT OF THE QUESTION ABOUT DEFICITS,

OK CHOICE IS EITHER

BROADENING THE TAX BASE, MY OWN VIEW IS THAT WILL THE ARGUMENT WAS PERHAPS SOMEWHAT OVERDONE IN THE PAST, AND YOU NOTICE THAT I'VE STARTED USING SLIGHTLY DIFFERENT LANGUAGE SUBJECT. THERE USED TO BE A TRADITION TO FOCUS ON THE RATIO DIRECT AND INDIRECT TAXATION AND THEN TO ARGUE THAT INDIRECT WAS MORE

DECREASE STABLE AND HENCE WE SHOULD INCREASE THAT AND DEPENDENCE ON DIRECT TAXATION, THAT'S BASICALLY THE ARGUMENT AND LED TO THE PROPOSAL TO HAVE A SALES TAX.

THAT

BETWEEN

TAXATION OUR

THAT

NECESSARILY

A

IN THE SALARIES TAX

UNSTABLE.

MORE

RATES.

COURSE

FIRST OF All, THE ARGUMENT IS GENERALISATION, AND IT IS NOT A TERRIBLY GOOD GENERALISATION, SENSE THAT SOME DIRECT TAXES ARE ACTUALLY VERY STABLE.

VERY 18

SOME INDIRECT TAXES ARE ONE THAT IS VERY STABLE.

MUCH SO YOU HAVE TO BE STAMP DUTY IS A GOOD EXAMPLE OF THAT. SELECTIVE AND WHAT I DID LAST YEAR OF COURSE WAS CHOOSE A TAX, WHICH I

IS ΤΟ BE

AND EXCELLENT TAX, AN STILL BELIEVE

THE UNFORTUNATELY, THAT DIDN'T PROVE TO BE A PARTICULARLY FRUITFUL, OF ACTION, TO PUT IT MILDLY. THE SALES TAX IS ANOTHER EXAMPLE OF A THAT SINGAPORE PROPOSAL WHICH IS THEORETICALLY EXCELLENT, AND I SEE

I WISH THEM ARE BEING BOLD ENOUGH TO PROCEED WITH A VERSION OF IT.

NEW TAX GOOD LUCK. BUT IN OUR SITUATION, WHERE WE HAVE NO NEED FOR SOURCES, TO RELY ON A RATHER THEORETICAL ARGUMENT ABOUT STABILITY WHEN OUR REVENUE IS CLEARLY SUFFICIENT, AND WHEN THE INTRODUCTION OF TAX WOULD HAVE A ONE-OFF INFLATIONARY EFFECT, DOES NOT STRIKE TERRIBLY ATTRACTIVE, HENCE I HAVEN'T PURSUED IT.

SALES ME AS

/AND I