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Press Release
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FS pursues stability and growth in 2005-06 Budget
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The Financial Secretary, Mr Henry Tang, has today (March 16) in
his annual Budget laid foundations to consolidate the current economic
recovery through active promotion of social stability and economic
development.
Mr Tang also revealed that the government was well on the way to
balancing its books.
Delivering his second Budget, Mr Tang said the economy grew by 8.1%
in real terms in 2004, the highest growth in four years and well
above the 20-year average of 4.8%.
He forecast real GDP growth of 4.5% to 5.5% in 2005, with CPI inflation
expected to be 1.5%.
He said a fiscal surplus of $12 billion would be achieved in 2004-05.
But after discounting the proceeds from bond issuances, there would
still be a deficit of $13.4 billion.
The surplus was due to lower expenditure and higher revenue, with
land premiums in particular contributing $31.3 billion to government
coffers - more than two and a half times the original estimate.
Mr Tang also revealed that operating expenditure for 2004-05 would
be lower than the previous year's - down to $201.2 billion. Barring
two special accounting arrangements with the former municipal councils,
this is the first time in over 50 years that operating expenditure
has fallen.
"We have succeeded in checking the trend of our operating expenditure,"
he said.
"This clearly demonstrates that we have the determination and
capability to contain our spending."
Expenditure for 2005-06 will be $247.8 billion, with over 60% spent
on education, social welfare, health and security.
Mr Tang forecast a fiscal deficit of $10.5 billion for 2005-06.
The Consolidated Account was expected to return to surplus in 2007-08,
one year ahead of target, while the Operating Account would be restored
to balance in 2008-09 as scheduled. Public expenditure as a percentage
of GDP would decrease to 20.2% in 2005-06 and would fall below the
20% target in 2006-07.
He said the Government would uphold the principle of "Market
Leads, Government Facilitates" and actively promote economic
growth by facilitating the development of the market and providing
a favourable platform for the business community.
This would be achieved by encouraging fair competition, fostering
economic co-operation with the Mainland, assisting Hong Kong enterprises
to access the Mainland market, enhancing the competitiveness of
the financial, logistics and tourism industries, improving training
and attracting more talent.
"Boosting the economy will also provide us with more opportunities
to realise our potential and upgrade our standard of living,"
he said.
Mr Tang said the Government was determined to promote the principle
of fair competition. The Competition Policy Advisory Group would
appoint an independent committee to review existing competition
policy and the Group's composition, terms of reference and operations.
To strengthen the financial services industry, Mr Tang said he would
look for ways to improve the financial regulatory system, enhance
corporate governance, promote the bond market and explore further
development of RMB business in Hong Kong.
He proposed abolishing estate duty to facilitate further development
of Hong Kong's asset management services and enhance our competitiveness
as an international financial centre. The move would also help SMEs
who might encounter cash flow problems and operating difficulties
in settling estate duty. Legislation for this proposal and for the
exemption of offshore funds from profits tax would be introduced
as soon as possible.
Mr Tang said $500 million would be allocated over the next two years
to boost the development of the tourism industry.
A series of strategic global publicity and promotion programmes
would be launched by the Hong Kong Tourism Board to leverage major
milestones such as the opening of Hong Kong Disneyland, the second
phase of 'A Symphony of Lights', the Tung Chung Cable Car and Hong
Kong Wetland Park.
He said 2006 would be designated 'Discover Hong Kong Year', when
visitor arrivals were expected to exceed 27 million. This compares
to the record 21.81 million visitors in 2004.
An extra $500 million would also be made available to help small
and medium enterprises enhance their overall competitiveness through
the SME Export Marketing Fund and the SME Development Fund.
To improve the safety and appearance of old buildings, $830 million
will be allocated to the Buildings Department over five years from
2006-07 to remove over 180 000 unauthorised structures. This would
also help create job opportunities.
In terms of tax relief, the Financial Secretary unveiled two new
allowances for taxpayers taking care of dependent parents or grandparents
aged between 55 and 59.
"They will be granted a basic allowance of $15,000 a year,
with an additional allowance of the same amount if their parents
or grandparents are residing with them," he said.
To help families meet the costs of educating their children, Mr
Tang proposed to increase the child allowance from $30,000 per child
to $40,000.
The above new and increased allowances for grandparents, parents
and children together would cost $1.07 billion a year.
On the environmental front, Mr Tang said the Environment, Transport
and Works Bureau was studying the introduction of a product responsibility
scheme to boost the recovery and recycling of waste tyres.
The Bureau was also considering the feasibility of introducing a
tax to minimise the use of plastic bags in Hong Kong, where over
1 000 tonnes of plastic waste, equivalent to over 33 million plastic
bags, are dumped each day.
On the duty on alcoholic beverages, Mr Tang said the public had
expressed a diversity of views during the public consultation exercise.
While some considered the duty a stable source of revenue for the
Government, others believed that lowering the duty rate would boost
consumption and benefit consumers.
"After taking into account the divergent views of the public,
I have decided to maintain the status quo for now," he said.
Mr Tang said that the current rates charge of 5% would remain unchanged.
After having fallen by an accumulated average of 39% since 1999-2000,
rateable values on properties increased by about 7% on average last
year. As a result, about 65% of ratepayers would see an average
increase of around $40 a month in their rates bills.
On the Goods and Services Tax (GST), Mr Tang said that a public
consultation would be launched later this year and that the public
would have sufficient time to hold in-depth, thorough and constructive
discussions on the subject.
"At this stage, there is no need to jump to a conclusion,"
he said, "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."
Ends/Wednesday, March 16, 2005
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