Revenue Implications
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103. The above revenue-raising proposals will increase government revenue by $6 billion in 2003-04, $13 billion in 2004-05 and $14 billion each year from 2005-06 onwards. I will consider proposing other revenue measures in the next few years that will bring an additional $6 billion in order to meet the target of raising $20 billion by 2006-07.
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| Government Fees and Charges |
104. Last year, I announced that government fees and charges would be frozen until the end of March 2003. As most major fees and charges have been frozen for more than five years, and given the present serious deficit situation, I have decided not to extend this measure. I shall consider with the Policy Bureaux how best to adjust individual fees and charges.
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| Capital Revenue |
| 105. Land revenue is one source of capital revenue. Following the announcement last
November to suspend land sales for one year, the Government will thereafter only sell sites initiated by application. While this enables land supply to better meet market demands, it has become more difficult for the Government to forecast its revenue. The Government estimates that land revenue from 2003-04 to 2007-08 will be as follows: |
Year
|
2003-04
($ billion)
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2004-05
($ billion)
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2005-06
($ billion)
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2006-07
($ billion)
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2007-08
($ billion)
|
Land revenue
|
2.5
|
13.3
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19.3
|
20
|
20.6
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| 106. To make up the shortage of revenue, the Government plans to sell or securitise a total of $112 billion worth of assets in the next five years. The estimated revenue is as follows: |
Year
|
2003-04
($ billion)
|
2004-05
($ billion)
|
2005-06
($ billion)
|
2006-07
($ billion)
|
2007-08
($ billion)
|
Total proceeds from the sale
of assets and securitisation
|
21
|
30
|
24
|
21
|
16
|
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| Government Bonds |
| 107. Some have suggested that the Government should issue bonds, and employ financial management techniques to generate revenue which could be classified as income under our cash-based accounting system, so as to avoid substantially raising tax and cutting expenditure. The Government is not totally against issuing bonds. The questions that have to be considered are the use of the funds so raised, and the interest costs so incurred.
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| 108. Infrastructure is an investment in the future. If there is a lack of funds, the issuance of bonds is an acceptable option. The Government has issued bonds on three occasions in the past. The Financial Secretaries of the day clearly indicated that the purpose of issuing bonds was to provide funding for capital works projects. However, the problem before us now is that our Operating Account suffers from a prolonged shortage of revenue to cover expenditure. Issuance of bonds can only meet cashflow requirements but cannot solve the underlying problem. For the time being, we can draw on our fiscal reserves to cope with the deficit, and the cost of issuing bonds is higher than the investment income from the fiscal reserves. Therefore, we do not see any need to issue bonds.
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