TNAG-0607-FCO40-755-Monitoring-progress-made-on-planning-papers-on-Hong-Kong-1977 — Page 42

7.

via offshore companies (not only for Hong Kong companies**) which is sizeable and distributionally very

regressive, since it is only available to those with income from profits, and the share of profits in income rises very markedly with income.

(vii) (Long run) increase tax revenue by widening the tax base and making direct taxes "moderately progressive"*

(viii) (Long run) increase public borrowing from

internal and external sources.

(ix) Adoption of the same degree of revenue

planning as is currently given to expenditure planning.

(x) Modification of two of the existing budget guidelines and abolition of the other three which

'impose unnecessary constaints".

(xi) A tax on gifts and capital gains.

Monetary Policy C. Although the Government recognised it had adopted an active monetary policy in the 1977 Budget Speech its only tool of monetary intervention so far is intervention in the exchange rate. (More macro-tools are needed to be able to pursue the number of goals desired.)

8. R. (i) Turn the Monetary Affairs Branch (including the

Exchange Fund) into a 'monetary authority' or central bank with the following functions:

a)

responsibility for managing the exchange rate (and external reserves);

b)

responsibility for managing the domestic

money supply;

c) lender of last resort (reserve banker to the commercial banks);

d) banker to the Government;

e) regulator of financial markets;

f) supplies of domestic liquid assets;

/g)

**

This loophole makes Hong Kong a tax haven for many S. E. Asian companies.

This explicitly rejects the Government's view (expressed in the 1976 Budget) that revenue policy is an unsuitable way of pursuing "social justice".

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COMET LEITTÄJ