XN000022-1995-10-18 — Page 2

1 -

Government fees and charges

The Government would lose more than $2 billion a year in revenue if all fees and charges were frozen at their present levels, the acting Secretary for the Treasury, Mr Alan Lai, said today (Wednesday).

To put this figure in perspective, all the salaries tax concessions announced in the 1995. Budget had cost $1.2 billion in 1995-96, he added.

"The only way the Government could respond to a freeze would be either to reduce the level of service to match the frozen fees, or for the general taxpayer to subsidise the cost of services," he explained.

"Moreover, a one-year freeze would only store up problems for the future in a year's time fees would have to be increased to cover two years inflation. The amount of increase then would not be acceptable to the community."

Mr Lai said rigorous application of the user pays/full cost recovery principles was an integral part of Hong Kong's low tax regime. Finance Branch was committed to fiscal prudence, and strict adherence to these principles was very important.

"Of course there are some exceptions. For well understood reasons, the central Government heavily subsidises some services such as hospital charges and education fees. But these are special cases where there is overwhelming social justification."

Mr Lai also pointed out that a freeze on government charges would have only a minimal impact on inflation - less than 0.1 per cent.

End/Wednesday, October 18, 1995