XN000022-1994-07-20 — Page 5

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WEDNESDAY, JULY 20, 1994

"EVEN GREATER GOVERNMENT CONTRIBUTIONS WOULD INEVITABLY MEAN INCREASES IN TAXES, OR REDUCED RESOURCES FOR OTHER ESSENTIAL SERVICES TO THE PUBLIC. NONE OF US WANTS THAT," HE SAID.

NOTING THAT THE PROPOSED PENSION SCHEME WAS "IMAGINATIVE AND BOLD", MR TSANG SAID RECENT INDEPENDENT POLLS CONDUCTED ON THE SCHEME SEEMED TO SUGGEST STRONGLY THAT, DESPITE SOME CRITICAL COMMENTS BY A FEW ACADEMICS AND LEGISLATORS, THERE WAS SOLID COMMUNITY SUPPORT FOR THE PROPOSAL.

MR TSANG ALSO DISPELLED SOME OF THE FEARS THAT CERTAIN SECTORS

OF THE COMMUNITY HAD ABOUT THE PROPOSED SCHEME.

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HONG KONG IS AS UNLIKELY TO BECOME A WELFARE STATE AS WE ARE TO WIN THE NEXT WORLD CUP.

**WE INTEND THERE TO ALWAYS BE A CLEAR AND UNBREAKABLE LINK BETWEEN CONTRIBUTIONS AND BENEFITS.

"THE SCHEME WILL BE DESIGNED IN SUCH A WAY THAT INCREASED CONTRIBUTIONS WILL REQUIRE CLEAR AND CONSCIOUS COMMUNITY ENDORSEMENT AND SPECIFIC LEGISLATIVE APPROVAL.

"THERE IS NO QUESTION OF THE GOVERNMENT RAISING THE RATES OF BENEFITS AND CONTRIBUTIONS UNILATERALLY, HE SAID.

HE SAID THE NOTION THAT CONTRIBUTIONS TO THE

PROPOSED SCHEME

REPRESENTED A NEW TAX "BETRAYS A LACK OF UNDERSTANDING OF HOW OUR TAX SYSTEM WORKS",

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IN BRIEF, ALL OUR TAX REVENUE GOES INTO THE BIG POT WHICH WE

CALL THE GENERAL REVENUE ACCOUNT.

"FROM THIS POT WE TAKE WHAT WE NEED TO FUND ON-GOING PUBLIC SERVICES. THOSE DEPARTMENTS WHICH COLLECT TAX AND OTHER MONIES DO NOT GET TO KEEP AND USE THEM FOR THEIR OWN ACCOUNT, HE SAID.

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"HOWEVER, THE PENSION SCHEME WILL BE TOTALLY SELF-CONTAINED FINANCIALLY. ALL CONTRIBUTIONS WILL GO TO FUNDING PENSION BENEFITS AND NOTHING ELSE. THEY WILL NEVER GO NEAR THE GENERAL REVENUE, HE ADDED.

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ON THE QUESTION OF WHETHER THE GOVERNMENT WOULD GO BROKE, MR TSANG ANSWERED WITH AN UNEQUIVOCAL "NO".

"THE TOTAL COST TO THE GOVERNMENT AT 1994 PRICES. AMOUNTS TO NO MORE THAN JUST OVER THREE PER CENT OF OUR RECURRENT REVENUE. I DO NOT ENVISAGE THAT PROPORTION INCREASING, HE SAID.

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AS FOR POSSIBLE WIDER ECONOMIC DISBENEFITS FOR THE BUSINESS SECTOR, MR TSANG SAID THE FEARS WERE GROSSLY EXAGGERATED.

"OUR BUSINESSES ARE NO LONGER OPERATING AT THE MARGIN. SOLIDLY BASED, WELL FINANCED AND ARE ENJOYING AN EFFECTIVE SIGNIFICANTLY BELOW ANY OTHER TERRITORY IN THE REGION.

THEY ARE TAX

RATE

/"TO SUGGEST