TNAG-1728-FCO40-2441-Minutes-and-Hansards-of-the-Legislative-Council-of-Hong-Kong-1988 — Page 258

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Government has full responsibility to provide the best investment guidance, including the preparation of the highly analytical economic forecast. In this respect, I think more resources should be devoted to employ better-quality econometric models so as to obtain data of higher reference value for the preparation of the

economic forecast.

Sir, I would now like to say something about taxation.

The proposed one per cent reduction in the rate of tax on corporate profits is warmly welcomed by the industrial and commercial sectors. However, I think this kind of tax concession can only be regarded as part of an across-the-board reduction when we have a large surplus so that all sectors of the community can have a share. It will not, however, serve the purpose of stimulating massive investment.

To

Hong Kong's profits tax rate has been kept at a low level

pir cust of not exceeding 20% for many years. Compared with other advanced

Furthermore, or developing countries, this rate is very low indeed. our taxation system is a simple one, with neither heavy levies nor petty duties. Therefore the reduction in profits tax by one per cent basically will not be of much stimulus to foreign investors. The more determining factors to local and foreign industrial investors will be our future political stability, the availability of technical support and expertise as well as our wage level. the commercial and industrial sectors, the greatest advantage of the concession in profits tax is, rather, to allow them more capital for reinvestment. The Financial Secretary estimates that the cost of

If a large portion the reduction is $760 million for a full year. of this were spent on reinvestment, our economy will definitely be boosted. However, the most efficient way to stimulate economic growth is to encourage the manufacturing industry to make long-term

investment.