TNAG-0761-FCO40-965-Budget-of-Hong-Kong--1978-1979-1978 — Page 104

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GR 380

ORITY

CYMER/CAT A

FM HONG KONG 060529Z

HKK 100/2

C:

INDEX

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2

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TO PRIORITY F.C.0 TELNO.156 OF 6 FEBRUARY 78.

FOR STEWART (HKGD) FROM GOVERNOR.

MY TELNO.119 AND LETTER OF 31 JANUARY: 1978/79 BUDGET.

1. THE FIGURES HAVE MOVED APPRECIABLY AND A NEW NOTE, SUPERSEDING

THAT SENT WITH MY LETTER, WILL GO BY WEDNESDAY'S BAG.

2. THE MAIN DIFFERENCES ARE:-

(A)

77/78 SURPLUS INCREASED FROM DOLLARS 960M (960) TO 1,075M (1,075).

(B) 78/79 DRAFT ESTIMATES:-

(C)

(1) REVENUE IS DOLLARS 10,366M (10,366M) (C.F PLUS TWELVE

PERCENT INSTEAD OF NINE).

II)DEFICIT OF DOLLARS 320M (320) HAS BECOME SURPLUS OF

100M (100).

GDP FORECAST FOR 1978 IS STILL NOT FINISHED BUT IT (FOLLOWING WORD UNDERLINED) MAY BE NINE PERCENT IN

REAL TERMS.

(D) ESTIMATE OF TWENTY SIX PERCENT GROWTH IN TOTAL

EXPENDITURE UNCHANGED.

3. IN NEW SITUATION THE PROPOSED INCREASED OF ONE HALF PERCENT

IN PROFITS TAX COULD NOT BE JUSTIFIED, BUT THE F.S WILL ANNOUNCE:-

(A) NEW ARRANGEMENTS FOR THE TAXATION OF BANKS AS FROM 79/80 THAT WILL BRING IN ADDITIONAL DOLLARS 160M (160) THAT YEAR AND DOLLARS 82M (80) PER YEAR THEREAFTER.

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(B) PROBABLY