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Revenue: Sharing Wealth with the People

73.   Over recent months, I have heard suggestions that, as our economy recovers and the Government's financial position improves, we should increase expenditure or substantially reduce taxes, for example, by restoring the salaries tax bands and rates to their 2002?3 levels. However, other views hold that there is no need for the moment to introduce major tax relief. The Government should instead take this opportunity to save up for a rainy day.

74.   I have pointed out that Hong Kong will continue to be confronted with various challenges. In the face of these, as a government that manages public finances prudently and keeps expenditure within the limits of revenues, we should not rush into deciding on substantial tax reductions. For example, the proposal to restore salaries tax rates to their 2002?3 levels would reduce government revenue by $7 billion a year, if implemented, and cause nearly 100 000 taxpayers to fall out of the tax net. I consider that such a proposal would affect the stability of our public finances, and would shrink our narrow tax base still further. As I have mentioned earlier, I also believe that citizens should fulfil their civic responsibility by paying some tax.

75.   Being a government of the people, we need to appreciate our community's needs and be responsive to their aspirations with due regard to our fiscal position. Where practicable, we will indeed share wealth with the people. As our economy continues to improve, therefore, I am proposing to implement some modest tax concessions in the coming year to reduce the burden on taxpayers, particularly middle-class families, in accordance with the principle of affordability, but without wishing to narrow our tax base. I have decided against a one-off tax rebate as this would only be of short-term benefit.

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2005 © | Important notices Last revision date : 22 February, 2006