Hong Kong Lawmakers Approve 'Prudent' Budget

by Mary Swire, for LawAndTax-News.com, Hong Kong

30 March 2006

Hong Kong lawmakers yesterday gave their nod of approval to Financial Secretary Henry Tang's 2006-07 Budget, which places a strong emphasis on fiscal prudence at the expense of providing additional tax concessions.

The Appropriation Bill was approved in the Legislative Council in a vote of 50-4, with one abstention.

In a speech to the legislators on Wednesday, Tang recognised his proposed budget had generated "considerable debate in the community", although he claimed that his proposals have the support of the Hong Kong community at large.

"Our strong economic recovery and the improvement in the Government's financial position had heightened the expectations of some. I can therefore understand their wishes for concessions in taxes and increases in welfare. Although views are divergent, I am happy to note the findings of various independent surveys: the majority of respondents have endorsed my principle of fiscal prudence," he stated.

Tang outlined three broad policies in his budget: prudent management of public finances; expanding Renminbi business; and pooling of talent. These policies, he stated, would have a long-term beneficial effect on Hong Kong's future economic viability.

Tang's speech also placed a heavy emphasis on developing closer economic cooperation with mainland China.

"The policies adopted in our overall plans should be mutually beneficial to the Mainland. We must adhere to the 'three Cs' principle, namely, Complementarity, Co-operation and friendly Competition with the Mainland," he stated.

"We must provide the Mainland with an international standard of efficient, diversified and multi-currency instruments and financial services. This will help open up more fund-raising and investment channels for the Mainland and further consolidate our position as an international financial centre, thereby achieving a win-win situation," Tang added.

The Financial Secretary also argued that Hong Kong should seek to strengthen its role as the launchpad for mainland enterprises to invest and raise capital in international markets, complementing the Mainland's financial reform and economic development.

However, he stressed that Hong Kong will remain economically independent from China, and will not be adopting Beijing's brand of "socialist market economy".

"We will continue to adhere to the principles of a market economy and remain a capitalist society," he assured lawmakers.

In addition, Tang pledged to keep Hong Kong's taxes - one of its strongest selling points - "low and simple".

"I firmly believe that my Budget has struck the right balance. With our low taxation, we need to maintain a small government and a low level of expenditure. We need to be alert to the many challenges Hong Kong faces, and save up for any rainy days that lie ahead," stated Tang.

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