Tang Tells Hong Kong Businesses Not To Expect Any Tax Cuts
by Mary Swire, Tax-News.com, Hong Kong
26 November 2004

Hong Kong’s Financial Secretary Henry Tang has told business leaders in the territory not to expect any cuts in taxation, despite indications of a narrowing budget deficit and strong economic growth.

Higher-than-expected tax revenues combined with significant proceeds from recent government land sales are expected to help reduce the deficit to between HK$30 billion and HK$35 billion (US$3.85billion to US$4.5 billion) in 2004/2005, according to some estimates.

This compares to the government’s initial forecast of a HK$42.6 billion deficit for the same period. With the economy predicted to grow by 7.5% in 2004, the improved economic picture has led to calls from some quarters for some of the extra tax revenues collected to be given back in tax breaks.

However, in a recent address to the Hong Kong Chamber of Commerce, Tang sought to dampen speculation that the government is in a generous frame of mind.

"Some of you here would certainly like me to promise to lower profits tax, abolish estate duty and reduce the duty on wine. I am afraid I will have to disappoint you, at least for today," he explained, adding that it would be “hugely irresponsible” to loosen the fiscal reins at this juncture.

Recent remarks by the Financial Secretary seeking to ignite a debate on a future sales tax would appear to suggest that in fact, in terms of taxation policy, he is considering quite the reverse.

Seemingly confirming this viewpoint, Tang told the delegates: "It is precisely when an economy is on an upswing that we can afford to think about tax reform, particularly in broadening our narrow tax base."

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