ENG-2012 — Page 82

Chart 18

-2

Per cent

8

6

4

2

0

3

The Economy

Main Inflation Indicators

(year-on-year rate of change)

Composite CPI

GDP deflator

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 | 2009 |

2010

2011

2012

Inflation was generally on a tapering trend in 2012, amid the slower local economic growth and moderated imported inflation.

Public Finance

Management of Public Finance

The principles underlying the Government's management of public finances are enshrined in the Basic Law which stipulates that:

•

•

The HKSAR shall have independent finances, and shall use its revenues exclusively for its own purposes.

The HKSAR shall practise an independent taxation system, taking the low tax policy previously pursued in Hong Kong as reference.

The HKSAR shall follow the principle of keeping expenditure within the limits of revenues

in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep

the budget commensurate with the growth rate of its Gross Domestic Product.

The Legislative Council of HKSAR shall exercise the power to approve taxation and public expenditure.

The Government implements these constitutional provisions in its management of public finances by maintaining a low and simple tax regime and exercising fiscal prudence. Hong Kong's Public Finance Ordinance (PFO), stipulates a system for the control and management of Hong Kong's public finances and defines the respective powers and functions of the legislature and the executive. Pursuant to the PFO, the Financial Secretary submits to the Legislative Council an annual set of estimates of revenue and expenditure. The estimates are developed

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