TNAG-1361-FCO40-1807-Hong-Kong-Hansard-reports-and-minutes-of-the-meetings-of-the-1985 — Page 96

- 2 -

better utilization of public funds. On the other hand, we should note that the growth rate, in real terms, of GNP was 9.6% last year, which was very remarkable indeed.

I am afraid we may not be able to match a similar achievement in the coming years. Therefore if the growth of public sector expenditure is not held at bay, this percentage may rise again. I consider that we should concentrate our efforts on two aspects, namely, to apply appropriate restraint on expenditure and, more importantly, to spare no efforts in increasing productivity in order to achieve a better growth in

GDP.

In the past three years, the Government has tried various means to increase sources of revenue in order to achieve a balanced budget. The proposal in this year's budget to re-introduce the duty on non-alcoholic beverages has aroused much public outcry. I think in the years ahead, the Government will find very limited new sources of revenue which are acceptable to the public. I hope that the Financial Secretary would in future spend his efforts on cutting expenditure instead of further tapping new sources of revenue.

The Financial Secretary said in paragraph 43 of his speech, "I have frequently emphasised the need of a calm, steady but above all planned approach towards reducing the deficit." I believe he has applied this principle in both revenue and expenditure. Here, I would like to speak on the revenue aspect. We should stick to the long standing "source rule" in the imposition of tax, that is, we only levy taxes on

The status of Hong profits generated within the territory. Kong is unique. We have to establish close links and engage in activities with other countries for the purpose of promoting international trade. Besides, the international exchange of financial activities is also an important factor for the survival and development of Hong Kong. The inflow and outflow of capital and its management, visible and invisible, short-term and long-term, are interwoven with the economic