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Press Release

The Better Hong Kong Foundation Hong Kong Budget Forum Experts Praise This Year’s Gentle Budget by Financial Secretary

2000.03.08

Academic, business, tax and labor experts welcomed the Budget by Financial Secretary Donald Tsang who described it as, “a gentle hand on the tiller.” It proposed the least revenue measures of recent budgets and was hailed as one that gives due regard to the government’s economic philosophy of prudent fiscal policy, balanced income and expenditure, simple tax system and has considered the public’s interests in the economic recovery. The Budget was praised as forward looking in preparing the economy for a new era.

The Better Hong Kong Foundation held a Hong Kong Budget Forum immediately following the Budget Speech. Five experts from various sectors were invited to comment on the government’s financial blueprint for the year 2000/2001. The experts included: Professor Richard Wong, Director, School of Business, The University of Hong Kong; Professor Fan Yiu Kwan, Dean, School of Business of the Hong Kong Baptist University; Mr. Marcellus Wong, Partner, Tax Services, Arthur Andersen; Mr. Francis Lau, Executive Secretary, Chinese Manufacturers’ Association of Hong Kong; and, Mr. Wong Kwok Hing, Deputy Director, Social Affairs Committee, Hong Kong Federation of Trade Unions.

Professor Wong said, “the long term development of the Hong Kong economy relied on grasping the economic opportunities and in dealing with long-term issues such as, globalization of the economy, economic transformation, development of information technology and impact of the business environment.” Professor Wong also agreed with Mr. Tsang’s suggestions of strengthening labor training and education.

As to the plan of reforming the financial system and the introduction of a US dollar clearinghouse, Professor Wong considered it a creative idea which would help strengthen the position of Hong Kong as an international financial center.

Professor Wong explained that, “a US dollar clearinghouse would help save time for currency exchange, especially H-share companies which intend to list in the US and already use HK dollars to raise capital locally. It would also protect investors if for any reason the HK/US dollar peg became unstable.”

He also praised Mr. Tsang’s commitment of reviewing the entire tax system, but warned of the possible danger that if the review results favored the taxing of internet activities or to tax income out of Hong Kong it would seriously affect the economic and investment initiatives. He stressed, “a narrow tax base was no problem, the question was whether there were adequate measures to recover tax and deal with the instability in an economic cycle.”

Professor Fan also welcomed the establishment of a US dollar clearinghouse. He explained that, “such mechanisms in the Asian region only currently existed in Japan. The introduction of this in Hong Kong would strengthen the territory’s position as a major financial center in Asia.”

As to the tax review plan, he thought the government should not only consider adding new taxes as “the introduction of a sales tax was a large move which would have implications on economic resources, high opportunity costs and little gain for the economy.” Rather, he felt that, “the government should look for ways to improve existing tax, such as rates which already have a wide base. As it is already in existence it does not require further examination by the Legislative Council.”

Mr. Marcellus Wong, also Past Chairman of the Taxation Association said that, “this was not the first time Mr. Tsang used the approach of ‘suggesting little'”. He pointed out the budget failed to provide plans to respond to the economic opportunities created by the globalization of the economy and to help small and medium enterprises face the transformation as a result.

He suggested the government should learn from countries such as Singapore and India, and provide SMEs with tax relief to develop e-commerce to help them adapt to the changing economy.

In the area of a tax review, he disagreed with the government’s plan to have an internal body to review the tax system while also setting up an independent committee to examine new tax methods. He thought the work should not be split into two and should be done by the independent body alone.

Mr. Lau welcomed the government’s establishment of the new Innovation and Technology Commission and the renaming of the Trade Department to Industry and Trade Department. He explained that, “Hong Kong manufacturers have always confused the Industry Department and the Trade Department. The merging of the two departments would definitely help solve manufacturers’ problems more effectively.”

Mr. Wong Kwok Hing, who represents workers’ benefits, also welcomed the government’s move of reviewing the tax system. He said, “apart from examining ways to widen the tax base, the government should consider the ‘vertical fairness principle,’ for example, the more a company earns, the more it should contribute.” He disagreed with Mr. Tsang’s view that this would force large companies to split into smaller ones to avoid tax, and said, “the government should be able to introduce measures against it. “

He also pointed out the Budget lacked suggestions to help people who were relying on social security to find work and to assist SMEs in facing the changing economy. He hoped the government could set up an employment board to coordinate employment issues.

George Yuen, Chief Executive of the Better Hong Kong Foundation, said Mr. Tsang had presented a very good budget. “Although Mr. Tsang has put forward the least amount of tax changes, he has made many concrete, brave and forward-looking proposals to benefit the long term. He has also endeavored to reform education, and provide vocational training for youngsters and retraining for low income people to meet the demands of the changing economy.”

The suggestions made in the Forum will be given to the SAR government for consideration.

 

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The Better Hong Kong Foundation is a privately funded, non-profit, non-political organization, formed by leading Hong Kong business people to reinforce Hong Kong’s role as the leading regional, financial, shipping, trading, communication and technology center. The Foundation also serves to enhance greater international understanding between East and West by facilitating communications between Hong Kong, China and the international community.