XN000022-1994-08-19 — Page 3

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FRIDAY, AUGUST 19, 1994

TURNING ΤΟ CRITICISMS ABOUT THE PROPOSED CONTRIBUTION FROM EMPLOYERS, MRS CHAN SAID A CONTRIBUTION OF 1.5 PER CENT REPRESENTED VERY MINIMAL LEVY ON THE EMPLOYER.

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"WITHOUT THIS CONTRIBUTION, VERY SHARP INCREASES IN DIRECT TAXES WOULD BE REQUIRED. BOTH PROFITS AND SALARIES TAX WOULD HAVE TO RISE BY 4 PER CENT.

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"IF PENSIONS WERE TO BE FUNDED OUT OF TAXES, THE SCHEME WOULD OPEN-ENDED. THERE WOULD BE NO CAST-IRON LINK BETWEEN THE LEVEL OF BENEFITS PAID AND THE LEVEL OF CONTRIBUTIONS RECEIVED," SHE SAID.

OTHER SAFEGUARDS ARE INCLUDED IN THE PROPOSALS ΤΟ PREVENT PENSION BENEFITS FROM BECOMING AN EXCESSIVE BURDEN ON PINANCIAL RESOURCES.

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THE LEVEL OF BENEFITS WILL BE SET AT $2,300 A MONTH, то INCREASED REGULARLY IN LINE WITH INFLATION. HOWEVER, THE LEVEL BENEFITS WILL NOT BE IMPROVED AUTOMATICALLY TO MATCH INCREASES IN AVERAGE WAGES.

HENCE, THE TOTAL COST OF THE PENSION SCHEME COULD BE KEPT BELOW 2 PER CENT OF GDP. "THIS IS OBVIOUSLY NO THREAT TO OUR LONG-TERM COMPETITIVENESS ON WORLD MARKETS," MRS CHAN SAID.

SHE REITERATED THAT THE GOVERNMENT HAD ACCEPTED ITS PROPER OBLIGATIONS IN FULL. AS AN EMPLOYER, THE GOVERNMENT WILL CONTRIBUTE FOR ITS 180,000 STAFF AND ON BEHALF OF THE SUBVENTED SECTOR.

ON THE WELFARE SIDE, THE GOVERNMENT WILL PLOUGH BACK $3.6 BILLION, AS A START, INTO THE SCHEME THE WELFARE BENEFITS WHICH WOULD OTHERWISE HAVE BEEN PAID OUT TO ITS ELDERLY SOCIAL SECURITY CLIENTS.

IN ADDITION, THE GOVERNMENT WILL INJECT A CAPITAL CONTRIBUTION OF $10 BILLION INTO THE PENSION SCHEME.

"THE NET EFFECT OF THE GOVERNMENT'S INVOLVEMENT WILL BE DURING THE ENTIRE PROJECTION PERIOD, FOR EVERY THREE DOLLARS PAID AS PENSION BENEFITS, ONE DOLLAR WILL HAVE BEEN PAID IN BY GOVERNMENT," SHE SAID.

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THE CONSULTATION EXERCISE FOR THE PROPOSALS WILL RUN UNTIL END OF OCTOBER. THE PLAN IS TO REACH A DECISION BY THE END OF THE YEAR.

SECTORS DISCUSSIONS

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THIS DECISION WILL REFLECT THE VIEWS EXPRESSED BY ALL OF THE COMMUNITY, AND, VERY IMPORTANT, THE OUTCOME OF OUR WITH THE CHINESE GOVERNMENT," MRS CHAN SAID.

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