Negative Reactions To Hong Kong's Feeble Budget

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

08 March 2002

According to an opinion poll carried out by the University of Hong Kong after Financial Secretary Antony Leung had delivered Hong Kong's 2002-03 budget on Tuesday, less less than a third of the public believes the government will achieve its goal of returning to surplus by 2006-2007.

The survey also showed there was strong support for the move to cut civil servants' pay by 4.75% with 47% of respondents agreeing with the move, while 19% thought the proposed cut should be greater.

Leung said he would increase government revenue by increasing the duty on wine by 20% and cutting duty-free tobacco and wine allowances for residents, but 36% though these measures were insufficient. However, 63% agreed with the introduction of a Boundary Facilities Improvement Tax, which will be implemented next year.

Professional commentators suspect that the widely-criticised, limp budget may have designed to soften up the public for the real thing in the Chief Executive's policy address in October. Speakers at a seminar organised by the Hong Kong General Chamber of Commerce said the Financial Secretary had been wrong to ignore most of the measures suggested by the Advisory Committee on New Broad-Based Taxes to ease the SAR's $65.6 billion deficit.

''We've been let down,'' said Ian Perkin, chief economist of the chamber. "This budget really doesn't tackle the deficit except for using more reserves.'' The advisory committee issued a report last week proposing the government reduce personal allowances, impose a land and sea departure tax, increase property rates in the short-term while levying a goods and services tax in the long run. The task force led by the Secretary for Treasury Denise Yue estimated the SAR's $369.8 billion fiscal reserves would be depleted by the end of March 2009 unless action was taken.

Analysts said the major reason why Leung's maiden budget ignored the territory's fiscal woes was because he wanted to please the people, the business world and the Legislative Council all at the same time. Perkin said Leung was a smart man, but "not Machiavellian enough" to have ignored Legco.

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