XN000022-1996-03-07 — Page 5

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Now you talk about the study and that's about the operation of the corporation and risk management as well as the regulatory regime. We would, in particular, refer to experience overseas like the USA and so on. In fact one of the prime objectives of such a corporation is to ensure the stability of the banking sector and the financial sector in Hong Kong. We want to decentralise risks shouldered by banks in Hong Kong because the stability of the banking sector is of utmost importance to the stability of society as a whole.

Now for individual members of the public, when they wish to buy their own homes; in fact when we talk about the operation of this company we want to take a progressive approach so when we reach a certain stage, not immediate, it would be possible for home buyers to enjoy greater accessibility and availability in mortgage because right now banks offering mortgages are under a strict regulatory regime and risks are pretty centralised risks. So in other words with the setting up of the corporation there should be more funds available and that would lead to a reduction in interest rates but that should be the medium effect because we don't want to be too drastic, we want to take a progressive approach.

Question (HK Economic Times - in Cantonese): Coming back to the tax net. Now this year you have fewer tax-payers. In other words, the tax base will be much weaker and then you have an increase in recurrent expenditure. So, in the long-term revenue might not be stable and the Chinese side might be worried?

And I have a second question.

FS (in Cantonese): Well, let me take the first question first. In relation to the tax net. now this is not a question that arises this year. As our economy grows, our revenue will exceed expenditure. It is only reasonable for us to return some of the money to our tax-payers and in the process, therefore, the tax net will be affected. So this is something that is rather inevitable and is a conflict that cannot be avoided.

But if you look back in the past years. now we have been relying on our existing revenue base and we have got direct taxes including profits taxes and also personal assessment, salaries taxes for individuals, and that account for 40% of our revenue and it has been stable. For years it has been 40% even though we have been making changes that have an effect on the tax net. The 40% has remained quite stable and so under the circumstances when we listen to people saying that our revenue base will become weaker, I don't think that is an argument that can be substantiated but, of course, a wider revenue base might be better. But behind what is a wider revenue base might mean more people caught into the net and that is what is meant by extending our

tax net.