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The main features of the 2000-2001 budget include: -
* No new taxes. No tax increases despite a forecast deficit of $6.2 billion for 2000-2001;
* Growth in government recurrent expenditure to be restricted to 2.5% - half the forecast GDP growth rate of 5% for 2000;
* The Chief Executive's expenditure proposals will be funded, with additional spending of over $700 million in areas to promote employment and training, improve services for the elderly, the disabled, and low-income and single-parent families, as well as enhance building safety;
* An extra $800 million reserved for implementing new education initiatives;
* Trimming the size of the Civil Service by 10,000 over the next three years and the introduction of a voluntary retirement scheme to accelerate the pace of reform.
* Establishing an internal Task Force headed by the Secretary for the Treasury to examine whether Hong Kong has any structural fiscal problems; and to review the viability of the existing tax regime;
* Establishing an independent Committee comprising tax experts, professionals and academics to look at the suitability and implications of introducing new broad-based taxes, including a consumption-based tax.
Hong Kong's Economy
* Impressive rebound in the second half of 1999. Final quarter GDP growth of 8.7% leading to overall economic growth of 2.9% for the year.
* Consumer prices fell by an average of 4% in 1999 and expected to fall by 1% in 2000.
* Robust economic growth expected in 2000, with GDP forecast to grow by 5%.
* Trend growth of GDP for 4-year period (2000 to 2003) estimated to be 4% annually.
Public Finances
* Deficit in 1999 forecast to be $1.6 billion, $34.9 billion better than the deficit of $36.5 billion originally estimated.
* Improvement mainly as a result of a massive windfall from the earnings on investments with the Exchange Fund - $44 billion almost double the original estimate of $22.2 billion due to strong performance of Hong Kong stocks in the latter half of 1999.
* A deficit of $6.2 billion forecast for 2000.
* Return to balanced budgets beginning from 2001-02 and a modest surplus estimated for 2003-04.
* Fiscal reserves forecast to increase by $8.9 billion and reach $441.6 billion by end March 2004.
Revenue Measures
* 10% reduction in stamp duty on stock transactions from 0.25% to 0.225 % to boost competitiveness of stock market.
* Extension for a further three years of exemption from First Registration Tax for electric vehicles to help reduce air pollution.
* Extension for another nine months (to end 2000) of the concessionary rate for diesel at $2.00 per litre before measures to help car owners switch to less polluting LPG vehicles are in place.
Strategy for the 21st Century
* Economy to remain free, open and market-led;
* Better education and training for workforce;
* Government continue to provide maximum support for business and keep intervention in the economy to the minimum;
* Maximise the benefits of globalisation through strengthening Hong Kong's position as an international financial centre, harnessing the power of innovation and technology and attracting more companies to Hong Kong;
* Establish a new dedicated agency to attract investment into Hong Kong
* Capitalise on Hong Kong's China advantage, especially after the Mainland's accession to the WTO ;
* Retaining simple, predictable and low tax regime; and
* Keep public finances sound and healthy.
Ends/Wednesday, March 8, 2000
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