TNAG-1728-FCO40-2441-Minutes-and-Hansards-of-the-Legislative-Council-of-Hong-Kong-1988 — Page 140

the national accounts definition, includes the two railway corporations

So I asky but excludes subventions to non-government organisations.

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for one clear definition of the size of the public sector.

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[so,

I turn now to the tax concessions' in the Budget.

Someone told me

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he had recently seen in a London paper a headline: "It's our money,

It is, Nigel". There is a great and often forgotten truth there.

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indeed our money, Piers! It follows that if the tax system is producing more money than the Government needs to finance the activities that we have all agreed on, then it has an obligation to propose a reduction in taxation. There is no concession about it.

It is our work,

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our enterprise that produced the money in the first place. Furthermore, we taxpayers are all morally, though in Hong Kong not yet legally, entitled to see tax allowances increased in line with inflation. reason is, of course, that if this is not done, then taxpayers, whose money income has increased only in line with inflation, find themselves paying a higher proportion of an unchanged real income even if no increase in taxation has been legally authorised. The jargon for this is fiscal drag. The Financial Secretary claims that allowances will be raised broadly in line with inflation! For many taxpayers this is not true,

because he has proposed that the increases should be applied only to the additional' allowances which are subject to the claw back provision re-introduced last year. This means that for many taxpayers, these 24 allowances will be reduced or eliminated altogether.

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[Fiscal drag also operates if the Child Allowances and Dependant Parent &c.

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Allowances are not increased each year in line with inflation and if the tax bands are not widened or the rates within them reduced,, So these le : adjustments should always be made so long as inflation continues. year the Financial Secretary has proposed both some widening of the tax 31 bands and some reductions in the rates applied within them, but he has

not distinguished between the adjustments for inflation and the genuine. reductions. I believe that our entitlement to adjustments for inflation should be recognised and that they should be dealt with separately from any other changes to the personal taxation system, which may be called for by the need to increase or reduce taxation generally.

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