No Let Up For Hong Kong Taxpayers

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

13 March 2003

Hong Kong Chief Executive, Tung Chee-hwa this week warned that more tax increases are likely to be necessary in the short and medium-term in order to bridge the territory's budget deficit, despite a number of hikes introduced in Financial Secretary, Antony Leung Kam-chung's recent budget.

The SAR budget deficit has been estimated at HK$70 billion (or 5.5% of GDP) for the 2002/03 financial year. Despite a general recognition of the need for action, given this revelation's proximity to the budget, and the furore currently raging over Mr Leung's purchase of a luxury car ahead of last Wednesday's sharp tax increase on new cars, the prospect of new tax increases is unlikely to be well received by the taxpaying public.

There was some light at the end of the tunnel, however, as Mr Tung pledged that the planned introduction of a sales tax will not take place during the remainder of his term in office:

'It won't happen in the next four years,' he announced.

Speaking at a news briefing for local reporters, the SAR Chief Executive also revealed that the jurisdiction's civil service- which, according to Reuters accounts for more than 80% of the government's operating expenditure and 66% of total spending- can expect to be downsized by around 10% over the next five years.

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