TNAG-2753-FCO40-3968-Budget-of-Hong-Kong-1993 — Page 5

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3 Expenditures for 1993/94 are projected at HK$132.5 bn (18.5% of GDP), a 13% nominal

increase at a time of 9.5% inflation and 5.5% real GDP growth. The modest underlying increase

is mainly on health, environmental cleanup, road infrastructure, cheap housing, and trade

promotion - honouring the promises made by Governor Chris Patten in his Policy speech to

LEGCO on 7 October last year. Most of the spending on the planned new airport is undertaken by a separate Provisional Airport Authority, and is not included directly in the budget.

4 Revenues for 1993/94 are projected at HK$129.1 bn (18% of GDP), a 0.3% nominal fall over

the previous year. Apart from closure of loopholes for taxes on intellectual property and cars,

and the strengthening of the Inland Revenue field audit team, there was no effort to raise new revenues: Business rates and corporate profit tax were left unchanged after having been increased

last year, personal tax deductions were raised by up to 22%, duty on cosmetics and tax on horse racing were removed, stock transaction stamp duty was cut from 0.4% to 0.3%, and duties on

fuel, alcohol and tobacco were only increased by 9.5% in line with inflation, and the possible

introduction of a VAT type sales tax (mooted before previous budgets) no longer appears to be

on the agenda.

5 Reactions: The Hang Seng stock market index rallied to a new peak of 6468 today, despite a scathing editorial in today's Wen Wei Po (a Chinese sponsored newspaper) which condemned the budget as a reckless political ploy to win the hearts of the Hong Kong people: "Patten is using

Hong Kong's storeroom of surpluses amassed over the last few years as a bargaining chip for his own political advantage this is a political budget to win the hearts of the people". Patten was

...

described as "a completely Western politician who follows orders from London and does not

consider the needs of the post-1997 administration".

Developing World Division HO-3

Middle & Far East

4 March 1993

Jakob Lund (4483)

Jakes Sund

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