Tsang Pledges Tax Cuts For Hong Kong If Reinstated As Leader

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

05 February 2007

Donald Tsang has pledged to cut Hong Kong's individual and corporate income taxes if re-elected as the Special Administrative Region's Chief Executive next month.

Tsang officially announced that he would seek election to a second term of office last week and said that one of his key policies would be to return some of Hong Kong's fiscal surplus back to the population through a "gradual" reduction in salary and profit taxes to 15%.

Tsang's main rival in the race for Hong Kong's leadership is Alan Leong of the Civic Party, a pro-democracy candidate who believes that the territory's chief executive should be chosen by the population in a free vote. Currently, the chief executive is selected by an 800-strong electoral committee in Beijing, while the 60 members of Hong Kong's Legislative Council (Legco) are elected every 4 years under a complex weighted voting arrangement with input from a panel of industry bodies, professional sectors and other special interest groups.

However, it is thought that Tsang's position as Hong Kong's leader is virtually assured as he is Beijing's preferred candidate. Indeed, Leong himself has admitted that his chances of being appointed chief executive on March 25 are "close to zero." Nonetheless, Leong says that simply by standing and making his arguments heard, he is strengthening the cause of Democracy in Hong Kong.

While Tsang has made democratic noises, he has expressed the view that full democracy in Hong Kong is very much a long-term goal. Last year, his package of political reform proposals, which would have doubled the size of the Election Committee that will select the chief executive to 1,600 and would have added 10 seats to the Legco, were rejected as pro-democracy lawmakers called for measures that involved less direct political appointments.

Tsang took over as chief executive in 2005 after incumbent Tung chwee-hwa unexpectedly stepped down on grounds of ill-health, initially to serve out the remaining two years of Tung's term. He is regarded by Beijing and Hong Kong's business and finance communities as a safe pair of hands on the financial centre's tiller having presided over a strong resurgence in the territory's economy.

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