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Transcript of remarks by Financial Secretary
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Following is the transcript
of remarks (English portion) by the Financial Secretary, Mr Henry
Tang, at the press conference on the launch of a public consultation
on proposed reform to broaden Hong Kong's tax base at Central Government
Offices New Annexe this morning (July 18):
Reporter: You mentioned earlier in
Legco that the introduction of a GST would not affect the economy
and domestic consumption if it's introduced at the right time. But
is it quite inevitable that domestic consumption will be dealt a
blow and the economy also if a GST is introduced? And is it true
to say that the Government is not that determined to introduce a
GST and could withdraw it if there isn't a social consensus?
Financial Secretary: The important
point is that in this consultation we provide a document as a basis
for public discussion. I believe that although it is a controversial
subject and there is no consensus in the community for the introduction
of a GST now, it is an important issue that we should discuss in
public and that we should have a thorough and informed discussion.
This is the purpose of this public consultation. In the document
actually we do have a paragraph that illustrates possible effect
on consumption. The consumption behaviour will fluctuate upon the
introduction of a GST; that there will be some advance consumption
in advance of the introduction and there are a number of other economies
which have introduced a GST or a VAT have that kind of history,
so we do have a paragraph in it that illustrates that point. I welcome
you to read it. It's in chapter 9.
Reporter: (inaudible)
Financial Secretary: The Government
introduced this document for discussion. We are not saying we will
introduce it because right now we do not have a consensus to introduce
it. Nor do we have enough votes to introduce it. So as far as this
Government is concerned we feel it is important to introduce this
document for discussion of this very important subject and that
we hope the community will have an informed and rational discussion.
Reporter: The difficulty obviously
is in introducing the GST. The public is not going to be very susceptible
to such a proposal. And there are concerns that once this is introduced,
at a fairly low rate ¡V 5% you're proposing ¡V then there will be
quite large subsequent increases. Can you give any assurance that
this won't happen within a certain timeframe or can you give an
upper limit on the level that we could be seeing as a maximum level
of GST? And secondly, you mentioned repeatedly about the controversial
nature of this consultation. Do you have any concerns that when
you're introducing this to the public it could go the same way as
Article 23 legislation and heads could roll in the Government because
of it?
Financial Secretary: Well like I said
earlier, I believe that this is the right time to introduce this
document for consultation so that the public can engage in a rational
and mature discussion on this very important subject. I believe
ultimately, even if there is or there isn't a consensus, the community
will gain from this discussion because this discussion will allow
people to have a more thorough and a more rational discussion on
what is their responsibility to the community, what is a fair share
of the tax burden. We will not be able to force it through Legco,
because we don't have enough votes in the absence of a community
consensus, but I believe this roughly nine-month consultation exercise
will benefit the community in general if we are able to have a rational
and mature discussion.
Reporter: (inaudible)
Financial Secretary: We are not talking
about introduction of the GST now. We are now really talking about
having a rational and mature discussion of the subject.
Reporter: You mentioned that a GST
would be fair because it's pegged to consumption. But poor people
necessarily consume or spend all of their income. Most rich people
can't possibly consume all their income. Doesn't that make it inherently
unfair and also what do you think would be the effects of a GST
on income inequality in Hong Kong?
Financial Secretary: In our consultation
document we have made a number of proposals for discussion, mainly
on compensation and offsets for the CSSA recipients, meaning welfare
recipients, as well as for the lowest 20% income families. I firmly
believe that lower income families should be compensated in order
to mitigate the effect on their purchasing power. As far as those
who are not in the lowest 20% of household income, we have proposed
a number of other measures to mitigate the effect of this new tax.
I think most other tax jurisdictions around the world cannot be
that wrong in introducing a broad-based tax whether it is a GST
or a VAT. I don't think it will erode our international competitive
edge upon the introduction of a GST if we can reach a community
consensus on it.
Reporter: You said that now was the
right moment to have a discussion in part because there was some
economic stability. However second quarter GDP growth in China announced
today was 11.3% which is higher than forecast and a bit of an acceleration.
Raises prospect of cooling measures. Do you expect that to be economically
destabilising for Hong Kong and do you expect that to affect this
discussion of any possible introduction of a GST?
Financial Secretary: I believe this
is the right time for a discussion because the economic recovery
has been reasonably robust. In the last two years we have had an
average of 8% growth and the last quarter we have seen more than
8% growth. We will be announcing this quarter's figures fairly soon.
By and large I feel that with robust growth, moderate inflation
and relatively low unemployment it is the right time for a discussion.
Also it gives us that window to have this discussion on the premise
that it's going to be revenue-neutral ... that we will not be looking
to increase revenues if we introduce a GST. It would be highly undesirable
if we were in a situation where the discussion of this very important
subject has to be both a revenue measure as well as a tax reform
measure. So we are now able to concentrate on the tax reform aspect
and leaving it as revenue-neutral. I am pretty sure that effects
in China will have a spillover effect in Hong Kong because our economy
is very closely linked to the Mainland economy. But 11% growth is
a blistering pace so I am supportive of measure to cool the economy.
Macro-economic measures that will enable the Mainland's economy
to have a more sustainable growth should be welcomed by all of us.
(Please also refer to the Chinese
portion of the transcript.)
Ends/Tuesday, July 18, 2006
Issued at HKT 14:56
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