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Following is a translated version of the speech by the Secretary for the Treasury, Miss Denise Yue, in resuming the second reading debate of the Revenue (No.2) Bill 2000 in the Legislative Council today (May 10):

President,

I would first like to thank Members for their support of the Revenue (No.2) Bill 2000.

The Bill seeks to extend the concessionary diesel duty rate of $2 per litre for another nine months to December 31, 2000 and to extend the exemption of electric vehicles from First Registration Tax for another three years to March 31, 2003. These proposals are the remaining two of the three revenue concessions in the 2000-01 Budget announced by the Financial Secretary on March 8.

The proposal to extend the temporary diesel duty reduction seeks to avoid imposing an additional burden on the transport industry at a time when it is recovering from the economic setback of the last two years. As we expect the economy to have substantially improved by early next year, we propose to extend this concession for just another nine months until the end of this year.

The proposal to extend the First Registration Tax exemption for electric vehicles for three years aims to further promote the use and development of this environmentally friendly type of vehicles. This proposal will be conducive to our overall efforts in improving air quality.

May I take this opportunity to briefly respond to certain points in Hon LAU Kong-wah's speech just then. I believe the Secretary for the Environment and Food (SEF) has been and will continue to discuss with LegCo members and members of the community how best to improve Hong Kong's environment, especially through tackling the air pollution problem.

As a matter of principle, the Government considers it appropriate and worth considering how to make use of taxation (or fiscal) measures to achieve environmental protection objectives. But I should like to clearly point out that there are three ways in which we can deploy such measures.

The first two ways are respectively to make use of tax concessions and tax exemptions to induce environmentally friendly behaviour. The third way is to consider suitable tax increases for achieving environmental protection objectives. This is because I do not wish to give an impression to this Council that any fiscal measures to induce a change in environmental behaviour are restricted to tax concessions or exemptions. Rather, I should like to drive home the message that appropriate fiscal disincentives like tax increases are also capable of achieving the same effects.

As mentioned by Hon LAU Kong-wah, the Government had in fact promulgated that certain tax concessions or exemptions were implemented for environmental purposes. The exemption of electric vehicles from First Registration Tax in the Revenue (No.2) Bill 2000 is one example. This point was also mentioned by SEF yesterday.

We have already committed not to impose any duty on auto LPG for the rest of this year and afterwards, precisely for the purpose of inducing some desired changes in some longstanding behaviour for environmental purposes. However, whilst we are considering whether to reduce the diesel duty rate on Ultra Low Sulphur Diesel in future, we must also consider whether we should concurrently increase the duty rate on the conventional diesel which is more polluting, so as to discourage vehicle owners from using the latter. I am citing this example to illustrate the importance of how a two-pronged approach may bring about the maximum environmental benefits.

Chairman, may I once again thank Members for their support of the resumption of second reading debate for the Revenue (No.2) Bill 2000 and their support of the Bill itself.

President, with these remarks, I beg to move.

Note: Please also refer to the Chinese version.

End/Wednesday, May 10, 2000

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