Hong Kong Government On The Coals Over Budget Deficit

by Mary Swire, Tax-News.com, Hong Kong

21 January 2002

The Hong Kong Government has come under media fire over suggestions that the jurisdiction's budget deficit is structural rather than cyclical.

A damning report in the Hong Kong Standard on Friday suggested that this explanation rather suits the SAR authorities, because it provides them with an excuse to continue current levels of government spending- which have now reached 25% of GDP, compared with 15% seven years ago- while introducing new taxes and increasing existing ones.

''The government is facing a budget deficit of $60 billion, but is showing no signs of cutting back on big capital projects which at the moment Hong Kong cannot afford,' the paper accused, citing planned road building projects, public housing policies, the home ownership scheme, and the provision of free education and medical care for all as examples of ill-advised and expensive schemes.

'The worry is that the government will use the structural deficit verdict as an excuse to raise taxes. It is in other words taking money out of people's pockets and deciding how to invest it rather than letting the market decide,' the report said, concluding that the real problem which needs to be faced by the SAR authorities is not a structural deficit, but rather a 'structural propensity to spend'.

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