(Source : Government Information Centre)
FS pursues stability and growth in 2005-06 Budget
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