Plans To Tackle Hong Kong Deficit On Hold Until Next Year

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

21 August 2003

After recently scrapping its target of balancing the territory's fiscal finances by 2006/2007, the government of Hong Kong has indicated that no further plans will be unveiled to tackle the deficit until next year's budget.

Consequently, this means that a number of initiatives proposed by the former Financial Secretary Antony Leung are now being reviewed by the present incumbent, Henry Tang. These include such measures as the setting of fiscal deficit targets, the widening of the salaries tax base, the issuing of bonds and the possibility of a city sales tax.

The lack of a clear plan of action from the government has not impressed many of the territory's financial institutions, and some such as Steven Xu, Senior Economist at ICBC (Asia) have argued that the Financial Secretary should concentrate on cutting expenditure rather than focus on revenue raising initiatives.

"Government expenditure over GDP in Hong Kong is over 23 percent, that ratio has been increasing from 17 to 18 percent in '96/'97," Channel News Asia quoted Xu as observing this week. "You can see these few years, very, very rigid increase in expenditure. That is the root of the problem." He added that a faster pace of privatisation was the best route to kickstart the economy and provide jobs.

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