TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 13

THE EXCHANGE RATE HAD CONTINUED TO DEMONSTRATE

REMARKABLE STABILITY, REMAINING FOR MOST OF THE TIME WITHIN A

NARROW RANGE AGAINST THE US DOLLAR. THERE HAD NEVERTHELESS BEEN

SMODIC SPECULATION BASED ON UNFOUNDED RUMOURS OF A POSSIBLE

CHANGE IN THE LINK. THE FINANCIAL SECRETARY SAID, ''ALTHOUGH SUCH

SPECULATIVE ACTIVITY WAS SHORTLIVED, I REITERATE THAT THE

GOVERNMENT HAS NO INTENTION OF TAMPERING WITH THE LINK''.

6.

REFERRING TO GOVERNMENT EXPENDITURE, THE FINANCIAL SECRETARY

SAID IT REMAINED FIRMLY UNDER CONTROL. ON THE OTHER HAND REVENUE

YIELDS HAD INCREASED SUBSTANTIALLY IN RESPONSE TO THE IMPROVEMENT

IN ECONOMIC PERFORMANCE. AS A RESULT HE NOW EXPECTED IN THE

CURRENT FINANCIAL YEAR A SURPLUS ON GENERAL REVENUE ACCOUNT OF

SOME HKD3 BILLION. FURTHERMORE, ALTHOUGH PARTLY DUE TO REVENUE

OF A WINDFALL NATURE, THE BALANCES IN THE CAPITAL FUNDS HAD GAINED

SOME HKD1.9 BILLION. MOST OF THE IMPROVEMENT IN REVENUE HAD COME

FROM TAX SOURCES THAT WERE RECURRENT IN NATURE., HE WAS THEREFORE

ABLE TO PLAN ON THE BASIS THAT THIS REPRESENTED A GENUINE GAIV

TO THE NEW BASE WHICH WOULD BE SUSTAINED INTO 1987-88 AND

BEYOND. HE PROPOSED THAT THERE SHOULD BE A CONTROLLED INCREASE

IN PUBLIC SPENDING TOGETHER WITH A MODEST LOWERING OF THE

BURDEN ON TAXPAYERS.

7. THE FINANCIAL SECRETARY PRESENTED A PACKAGE OF MEASURES THAT

INCLUDED SMALL INCREASES IN DUTY ON LIQUOR, CIGARETTES AND FUEL

AND ON CAR REGISTRATION, BUSINESS REGISTRATION, LICENCES AND

TRAVEL DOCUMENTS. HE ALSO PROPOSED A REDUCTION IN THE RATE OF

PERSONAL TAX FROM 17 PERCENT TO 16.5 PERCENT., INCREASES IN THE

THRESHOLDS AND ALLOWANCES. HE PROPOSED THAT PROFIT TAX SHOULD BE

REDUCED FROM 18.5 PERCENT TO 18 PERCENT.

8. THE BUDGET HAS BEEN WELL-RECEIVED.

SIGNED HOLLOWAY

YYYY

HML NAN 9289

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