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Financial chief: HK should continue tax reform consultation
2006-10-16 17:55:53 Xinhua English

HONG KONG, Oct. 16 (Xinhua) -- Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) Henry Tang said here Monday the society should continue the consultation on the controversial Goods and Services Tax (GST) to find ways for its narrow tax base.

When asked by the press Monday, Tang said the SAR government had received 1,300 submissions in the first three months of the tax reform consultation, and most support continuing discussion on the issue.

Tang admitted that although the majority of submissions agreed that Hong Kong's tax base is exceptionally narrow, they have reservations about a GST.

"But they feel the public consultation should continue," Tang said.

Some people have said that basic daily necessity should be exempted and luxury items should be taxed progressively. Some have proposed to introduce new taxes such as an "electricity tax," he said.

"The government is willing to discuss all options with the community," Tang said, urging the continuity of the consultation to express their views in the coming six months.

The controversial proposal to introduce GST in the city known for its simple and low tax system, had triggered criticism and hot debate in the society as the Legislative Council will discuss a motion on Wednesday, asking the government to cease the consultation.

Tang hoped legislators will take a realistic view, and not neglect the problem that Hong Kong has a narrow tax base and that the issue has not yet been fully discussed.

"A steady source of income is important as government spending is steady compared with its revenues," he said, adding Hong Kong's salaries tax, which is the government's major source of revenue, will shrink in the wake of an aging population.

It is predicted that by 2023 the HKSAR government will have to spend an additional 50 billion HK dollars (6.43 billion U.S. dollars) in health-care services. And it will cost 5.2 billion HK dollars (about 668 million U.S. dollars) if the salaries tax rates revert back to the 2002-03 level and another 2.4 billion HK dollars (308 million U.S. dollars) if small class education is implemented.

"To discuss the tax system," Tang said, "it is a good time now as the economy is improving, inflation is low and the unemployment rate is falling." Enditem

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