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CE speaks on Goods and Services Tax
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Following is a transcript of
the remarks (English portion) made by the Chief Executive, Mr Donald
Tsang, on Goods and Services Tax at the Main Wing lobby of the Central
Government Offices today (September 12):
The Executive Council has just held
its first meeting after the summer recess. I would like to take
this opportunity to explain the Government's position on the public
consultation on the broadening of our tax base.
The Goods and Services Tax (GST)
is an initiative put forward by the Administration and the Executive
Council after serious deliberations. It is our consensus that our
economy is picking up. Now is the best time to map out the initiatives
to secure long-term growth for our economy and to prepare for our
future, any future crisis. Of all the options considered, we believe
that the introduction of a GST is the most practical one to ensure
a stable source of public revenue.
Good medicine often comes as a bitter
pill. Members of the public generally have reservations about the
proposal for a GST. I understand that widening the tax net and broadening
the tax base will never be universally welcomed, but I am also convinced
that the Government should never refrain from doing the right thing
even though it is unpopular. Evasion is never a way out. We have
a responsibility to seek the best solutions to issues that Hong
Kong is facing.
We must stay alert to the challenges
that lie ahead, and Hong Kong is facing three fundamental challenges:
First, as an externally oriented
economy, Hong Kong is vulnerable to external influences including
surging oil prices and economic volatilities among our major trading
partners, such as the United States. Though we have restored a fiscal
balance ahead of schedule, the deficit we suffered in previous years
can hardly be restored. With accelerating globalisation and the
unavoidable cycle of boom and bust, we must be fully prepared for
future crises or slowdowns.
Second, our population is ageing
rapidly. One of every eight people in Hong Kong is aged 65 or above.
In 25 years, about a quarter of the population will be senior citizens.
Given that the salaries tax now accounts for nearly a third of total
revenue, it is a very important part of our income, but the ageing
population will mean there will be a reduction in the number of
salaries taxpayers, and what is more, there will be a drastic rise
in demand for healthcare and social welfare for the aged.
Third, spending on education, social
welfare, public health and medical services now constitutes about
60% of our public expenditure. Expenditure in these areas is now
all controlled but cannot be trimmed down substantially even in
economic slowdowns. I have grave doubts we should trim down these
expenditure items. Indeed, we are under growing pressure every day
to increase spending in these critical areas.
In the 32 Policy Address consultation
sessions I have chaired over the past month, some participants spoke
in favour of the introduction of a GST and some against, while most
requested further details on the implementation of the tax. We will
continue to explain to the community what the initiative is about,
including the compensation packages for the low-income and CSSA
recipients and proposals on how the additional revenue likely to
be generated by GST will be applied. In the remaining six months
of the consultation period, we will keep our minds open and will
listen to the views of all sectors of the community.
The Government could of course hide
its head in the sand, pretending not to see the clear and present
challenges that Hong Kong is facing. Taking a short-term political
view, doing so could even help the popularity of the Government.
However, as a Government with a long-term commitment to Hong Kong,
we must formulate policies that can serve the real interests of
the community, not those that look the most welcoming to the community.
Similarly, people who oppose a GST owe it to the public to put forward
sustainable alternatives to resolve these problems which are outlined.
Let me say this again. On the issues
of broadening our tax base, maintaining a stable tax revenue and
the introduction of a GST, the Government will keep an open mind
to listen carefully to the views and proposals of all sectors of
the community. Thank you very much.
(Please also refer to the Chinese
portion of the remarks)
Ends/Tuesday, September 12, 2006
Issued at HKT 15:20
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