Tung Says Sales Tax Would Exacerbate Hong Kong's Deflation Problem

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

29 October 2002

Speaking to Channel News Asia at the sidelines of last week's Asia Pacific Economic Cooperation meeting, Hong Kong Chief Executive, Tung Chee-hwa confirmed that the government would not be considering the introduction of a sales tax to tackle the jurisdiction's budget deficit.

Echoing the words of Financial Secretary, Antony Leung Kam-chung, Mr Tung explained that the SAR authorities will instead look at reducing public spending - in particular expenditure on the excessively large civil service - arguing that a sales tax would only worsen the jurisdiction's deflation problem.

Mr Tung also reportedly reiterated the government's commitment to balancing the budget by 2007, and stressed that any new tax measures considered will need to be carefully examined to ensure that they will not damage business in the territory.

However, regional economists have warned that Mr Leung's pledge to balance the budget by fiscal 2006-07 is becoming increasingly unlikely as time goes on.

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