Tang Pledges To Leave Hong Kong Tax Rates On Hold

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

14 February 2005

Hong Kong’s Financial Secretary Henry Tang has pledged to leave tax rates on hold in next month’s budget presentation, although he sought to dampen expectations of any sweeteners in the form of extra tax relief measures, despite the possibility that the government’s finances could soon move into surplus.

Although last year saw an acceleration in tax revenues flowing into the SAR government’s coffers, mainly as a result of unexpectedly strong economic growth during 2004 and the selling off of government land and various other assets, Tang has told taxpayers not to expect any tax cuts, as these revenues represent a short-term fix to the budgetary situation.

"I realise that the past year was a difficult one for the middle class in particular which has shouldered a great deal of the financial burden. I know what they want to hear most is that there won't be any tax increases. I can only say that I will refrain from raising taxes if the situation allows me," Tang stated, according to the Hong Kong Standard.

Tang also reminded taxpayers that the $HK26 billion (US$3.3 billion) raised from a debt issue will ultimately have to be repaid by the government.

"We cannot just look at the figures of one year. We need to set a long-term goal. If this year the figure is good, but it turns bad next year, then our efforts will be futile. We need to plan for a period of five years, to lay a good foundation of government finance," he observed.

While initial estimates forecast that the government’s budget deficit would reach HK42.6 billion in the fiscal year ending in March 2005, the government’s deficit for the first eight months of the year to November was in actual fact just HK3 billion. Many analysts believe it could be in surplus by the year’s end, largely as a result of non-recurring revenues.

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