CONFIDENTIAL
141435
MDHO 6868
IS INTENDED TO BE VESTED IN THE SPECIAL ADMINISTRATIVE REGION IN THIS PARTICULAR FIELD: AND THE PROSPECT OF THE TEXT GIVING RISE TO JUSTICIABLE ISSUES IN THE COURTS IF VESTED INTERESTS WERE TO CHALLENGE THE FINANCIAL LEGISLATION OF THE SAR IS A REAL ONE. TEXTS WHICH WOULD, IT IS SUGGESTED, ANSWER THESE CRITICISMS ARE AS FOLLOWS:-
ARTICLE 106
QUOTE THE HONG KONG SAR SHALL ON ITS OWN DEAL WITH FINANCIAL MATTERS, INCLUDING DISPOSING OF ITS FINANCIAL RESOURCES AND DRAWING UP ITS BUDGETS AND ITS FINAL ACCOUNTS. IN DECIDING UPON ITS FINANCIAL POLICIES, THE HONG KONG SAR SHALL TAKE ACCOUNT OF THE DESIRABILITY OF BALANCING EXPENDITURE AND REVENUES OVER A PERIOD OF YEARS AND OF THE PRACTICE OF PREVIOUS YEARS OF RELATING THE GROWTH OF EXPENDITURE TO THE GROWTH OF THE GROSS DOMESTIC PRODUCT. THE HONG KONG SAR SHALL REPORT ITS BUDGETS AND FINAL ACCOUNTS TO THE CPG FOR THE RECORD THROUGH THE CHIEF EXECUTIVE. ARTICLE 107
THE HONG KONG SAR SHALL PRACTICE AN INDEPENDENT TAXATION SYSTEM. IT SHALL ON ITS OWN ENACT LAWS CONCERNING TYPES OF TAXES, TAX RATES, TAX REDUCTION AND EXEMPTIONS AND OTHER MATTERS OF TAXATION. IN DECIDING UPON ITS TAXATION POLICIES, THE HONG KONG SAR SHALL TAKE ACCOUNT OF THE EFFECTS OF THE LOW TAX POLICY OF PREVIOUS YEARS.
UNQUOTE.
4.
A NUMBER OF OTHER ARTICLES IN THE DRAFT HAVE ALSO BEEN CRITICISED IN VARIOUS QUARTERS AS NOT BEING CONSISTENT, TO A GREATER OR LESS DEGREE, WITH THE LETTER OR SPIRIT OF THE JOINT DECLARATION. THEY ARE :
(A) QUOTE A HIGH DEGREE OF AUTONOMY UNQUOTE: PARAGRAPH 3(2) OF THE JOINT DECLARATION REFERS TO THE QUOTE HIGH DEGREE OF AUTONOMY EXCEPT IN FOREIGN AND DEFENCE AFFAIRS UNQUOTE WHICH IS TO BE ENJOYED BY THE SAR. HOWEVER THAT FORUMLA IS NOT REPEATED IN THE DRAFT. IN PARTICULAR THE CHAPTERS ON GENERAL PRINCIPLES AND RELATIONSHIP BETWEEN THE CENTRAL AUTHORITIES AND THE HONG KONG SPECIAL ADMINISTRATIVE REGION WHEN REFERRING TO THIS CONCEPT (ARTICLES 2 AND 12) STOP SHORT AT QUOTE A HIGH DEGREE OF AUTONOMY UNQUOTE AND DO NOT INCLUDE ANY REFERENCE TO THE EXTENT OF THAT AUTONOMY AS ENVISAGED IN THE JOINT DECLARATION. IN ORDER ADEQUATELY TO REFLECT THAT PROVISION IT WOULD BE APPROPRIATE TO ADD THE PHRASE QUOTE EXCEPT IN FOREIGN OR DEFENCE AFFAIRS UNQUOTE. I MENTIONED THIS POINT IN RELATION TO WHAT IS NOW ARTICLE 12 IN MY LETTER TO YOU OF 1 AUGUST 1988. THE ADDITION OF QUOTE EXCEPT IN FOREIGN OR DEFENCE AFFAIRS UNQUOTE AFTER QUOTE A HIGH DEGREE OF AUTONOMY UNQUOTE COULD BE MADE EITHER IN THAT
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