12.
-5-
Some limited reductions have already been announced.
But
the exact size of the future garrison and its financing is the subject of discussions with the Hong Kong Government and it would be inappropriate for me to say more until the problem has been more fully considered.
INVESTMENT AND TAXATION POLICIES
13. An important determinant of Hong Kong's economic policy is the need to attract investment capital from abroad.
Hong
Kong considers it can only retain business and secure new investment by providing an economic environment more favourable that that in other south-east Asian countries (Korea, Taiwan, Singapore and Indonesia). These considerations have also largely determined Hong Kong's liberal taxation policies. But in this year's budget tax on profits was raised to 161% (corresponding to increase of 10% over the previous level). The Financial Secretary also announced his intention to introduce a tax on dividends and to appoint an Inland Revenue Ordinance Review Committee to undertake a thorough examination of all aspects of revenue and taxation in the territory. I am personally quite sure that Hong Kong should make a determined drive to raise additional revenue on a more equitable basis.
THE 1975 BUDGET: DETAILS
14. The Budget provides for a total expenditure of HK$ 6,615m. In several respects, this budget broke with traditional practice:
(i) Deficit budgeting was hitherto virtually unknown. (ii) Loan finance of budget deficit is an innovation. (iii) Part of this loan finance is to be raised by issue
of Government paper in Hong Kong itself.
(iv) There was a substantial increase in Hong Kong taxes.
and charges (in this instance equal to 7.3% of the revised estimates for 1974/75), a difficult step to
take at a time of serious recession.
SOCIAL PROGRAMMES
16. The effects of the recession are making it difficult
/for
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