TNAG-1728-FCO40-2441-Minutes-and-Hansards-of-the-Legislative-Council-of-Hong-Kong-1988 — Page 260

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reduce the rate of direct tax; (2) to lessen the heavy dependence on direct tax for revenue; (3) to follow the example of other advanced countries to make sales tax a means to maintain a stable revenue. My -initial views on these reasons are as follows.

First, as I have mentioned earlier, the rate of direct tax in Hong Kong is already very low and is indeed lower than any advanced or developing countries. It is really very doubtful whether it should be or can be further reduced.

The second reason mentioned should be of more

significance. The present taxation system depends very heavily upon the direct tax from the so called 'sandwich class', so much so that As far as the 1988-89 it has almost reached an unreasonable level. Budget is concerned, over 66% of the total salaries tax yield comes from 9.9% of the salaried tax payers.

per cent

ben sent

It is also widely known that

the Government relies a great deal on a handful of large listed

While the desire of the Government to companies for profits tax.

broaden the tax base is understandable, I wonder whether it is because the Government has already anticipated difficulties in future revenue yield or uncertainties in the revenue from direct tax and therefore has to consider widening the indirect tax base to make

Otherwise, I really fail to see the it a major source of revenue.

reasons for making such a significant change in our taxation sytem.

Finally, it is well-known that the tax system in Hong Kong Therefore, there is no

is simple and relatively easy to administer. need at all to make it complicated by following foreign examples.

Sir, whether it be charged at the wholesale or retail level and whether the rate is high or low, the sales tax will

For instance, the invariably affect the livelihood of the people. sales tax will increase the burden of the low income group which do

On the other hand, for those who have not have to pay salaries tax. to pay salaries tax it will mean an additional tax burden. therefore doubtful whether the aim of an equitable taxation system

It is