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Budget Speech
  Budget Speech
  Goods and Services Tax

102.    Last year I mentioned that there was to be a study on the implementation of a goods and services tax (GST).  Suggestions have been made that GST is unfair to the grass roots because it is regressive.  However, there are also people who support the introduction of GST on the grounds that it is in line with the principle of affordability.  In general, wealthy people, who have a greater capacity to spend, will pay more GST.

103.    I appreciate the community's concerns over the introduction of GST.  But I would like to emphasise that Hong Kong will continue to maintain the low and simple tax regime that underpins our success.  The purpose of the proposed GST is not to increase the grass roots' tax burden.  The reason for its introduction is to broaden our tax base so as to secure a steadier source of revenue and reduce our reliance on more volatile revenues.  As a matter of fact, our salaries tax and profits tax, which are the major recurrent revenues of the Government, are paid by a minority of taxpayers and enterprises, and these taxes are highly sensitive to economic fluctuations.  The problems arising from our narrow tax base are abundantly clear.  The International Monetary Fund has also pointed out that Hong Kong should introduce GST to solve the problem of its structural deficit.

104.    An internal committee set up by the Government has carried out the GST study.  Our next step is to conduct a public consultation on this subject.  We will provide further information in the consultation document that we are drawing up for publication later this year to give the public a better understanding of the tax.  Overseas experience shows that it takes about three years from making a decision to introduce GST to actual implementation.  Therefore, the public will have sufficient time to hold in-depth, thorough and constructive discussions on this subject.  At this stage, there is no need to jump to a conclusion.  As GST will have far-reaching impacts on our tax regime and the Government's financial health, we will listen carefully to the views of the public.



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2004 | Important notices
Last revision date : 16 March, 2005