ENG-1959 — Page 72

52

1954-5

1955-6

1956-7

1957-8

1958-9

HONG KONG ANNUAL REPORT

Revenue

Expenditure

$ mill.

$ mill.

Surplus $ mill.

434.4

373.3

61.1

454.7

402.5

52.2

509.7

469.5

40.2

584.2

532.7

51.5

629.3

589.9

39.4

Deficit

600.6

693.0

92.4

1959-60 (estimate)

It is especially noteworthy that these surplus balances have been accumulated despite the fact that all capital expenditure, other than a small amount which was met by an increase in public debt (see below), was met from revenue. For example, in the years 1957-8 and 1958-9 the contribution to capital expenditure from recurrent revenue collected in those years was $102 million and $163 million respectively.

The principal reason for these results, which are on the face of them so favourable, is that the exceptionally rapid increase in population during these years generated internal economic activity which substantially raised the yield of taxation without an increase in the rates of taxation; whereas there was an inevitable time- lag before the Government could develop the public and social services necessary to meet the requirements of the increased population. Since 1950-1, when the last significant increase in tax rates was made, revenue has increased from $291.7 million to $629.3 million in 1958-9. The rate of increase in revenue has been affected by variations in such factors as the economic situation and capital inflows, but the upward trend is unbroken. As the development of public and social services has accelerated, the margin between recurrent revenue and expenditure has tended to narrow: for example, the proportion of the latter to the former was 50% in 1952-3 but had risen to 64% by 1958-9. There is even now a fair margin between them, but the Colony still faces a formidable programme of expansion of public and social services and a vast public works programme to meet the needs of the present population.

The Revenue and Expenditure figures for 1958-9 are at Appendices IV and V. Revenue, totalling $629 million, was $75 million more than the original estimate, the main excess being on Internal Revenue ($31 million, of which Earnings and Profits Tax