Tung Rules Out Hong Kong Sales Tax Before Mid-2007

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

13 January 2005

The Hong Kong government will shortly advance plans for a new sales tax, although the new levy is unlikely to be introduced before the middle of 2007, according to Chief Executive Tung Chee-hwa.

Despite economic growth of more than 7% in 2004, Tung explained in his annual policy address to legislators yesterday that it was still early days in Hong Kong’s economic recovery, and he feared that the early introduction of a sales tax would threaten the territory's economy.

"Our economy is still at the early stage of post-recovery consolidation. Overseas experience suggests that this isn't the appropriate time to introduce a goods and services tax," stated Tung.

This suggests that it is unlikely that a sales tax will be introduced before his term as Chief Executive of the SAR expires in June 2007. Financial Secretary Henry Tang indicated in comments made in November last year that new sales tax legislation would probably take at least three years to implement.

It would appear that the government is keen to press ahead with the first stages of the new tax, however, with Tang reportedly preparing to present a specific proposal in his March budget announcement.

It is understood that this proposal will then be put to a public consultation during April and May 2005.

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