TNAG-0747-FCO40-951-Visits-of-Foreign-and-Commonwealth-officials-to-Hong-Kong-1978 — Page 118

Registry

No.

SECURITY CLASSIFICATION

-Top Secret,

Secret

Confidential.

Restricted

Unclassified,

PRIVACY MARKING

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.............In Confidence

DRAFT

To:-

CONFIDENTTAL UK EYES A

i

Type 1 +

From

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Telephone No. Ext.

Department

BACKGROUND NOTES ON HONG KONG GOVERNMENT (HKG) ECONOMIC POLICIES

TAX POLICY

1.

1

Attached is Graph 1, which shows just how (non) progressive

Hong Kong's direct tax system is. I do not yet know how old

it is, but for the small sections I have been able to check

it seems up-to-date (ie incorporating the tax changes in the

1977 Budget there were none this year).

POLICY DEFINITIONS AND STATISTICS

2.

Government Expenditure. Although we have figures for net consolidated account expenditure next year, they include

substantial transfers of reserves which are not likely to be

completely spent and do not include all government-guaranteed

expenditure such as the Mass Transit Railway, which is

included as public expenditure in 'Estimates of GDP'. Too

much analysis in the Budget was spent on the General Revenue

account, rather than the overall net Consolidated account.

Government Revenue and Fiscal Surpluses. Richard Herd

has drawn my attention to the fact that several items that

are currently included as 'Government Revenue' (in the General Revenue and Consolidated accounts) do not really constitute

'leakages' out of private sector flows and into the public

sector, but are rather, simply, ways of augmenting fiscal assets

at no net cost to the private sector.

For economic purposes

3.

G

we might consider looking at Government Revenue net of (capital

account) land sales and loans there is, after all, very little

difference between the Hong Kong Government selling building land and the British Government selling BP shares or Government

bonds; all three are ways of realizing government assets, but

at no net expense to the private sector, which, in buying

these assets, is merely exchanging very liquid assets for les6

liquid. Admittedly, when the HKG sells land much of the land

is leasehold and so can be 'sold' again by some future

CONFIDENTIAL,

/government

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