My third fiscal principle is to be pragmatic.
Public resources are limited, but social aspirations are unlimited. As Financial Secretary, I must manage and use public money properly because this is the
public's wealth. My objective is to allocate resources where they are required, to ensure that every dollar is well spent and that measures introduced are targeted to benefit those most in need.
I will continue to maintain fiscal discipline, strictly control recurrent expenditure and uphold the principle of
"Big Market, Small Government", so that the share of public expenditure will be maintained at 20 per cent or below of GDP.
A big market can increase the share of the private sector in the economy and allow market forces to allocate our limited resources in the most efficient way for the maximum benefit of the community as a whole. A small government can prevent the public sector from acquiring excessive resources and thus reducing efficiency in the allocation and use of resources. Moreover, a small government can minimise regulation, thereby facilitating business operations and attracting overseas investment. However, we will also keep government expenditure in line with economic growth to ensure that our services can meet the changing needs of the community.
We should adopt a pragmatic approach to the problem of the narrow tax base of Hong Kong. In July 2006, the Government launched a public consultation on reforming Hong
Kong's tax system to broaden our tax base. According to consultation findings, the community recognises that there is a need for the Government to broaden the tax base. However, there is no clear consensus or inclination on how to achieve this objective.
We will continue to study options on broadening the tax base. I hope to provide opportunities for the community to discuss the tax reform options that are equitable and conform to the
"ability-to-pay" principle, can generate stable revenue, offer certainty and are predictable.