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Following is the transcript (English portion) of the question and answer session given by the Financial Secretary, Mr Antony Leung, during his Budget press conference today (March 5):

Question: You said you plan to sell or securitise $112 billion worth of assets; what would they be and how you would do that? Perhaps you could repeat that in English. My second question is on Paragraph 96. Three of your predecessors have said to me in the past that they didn't want to go into the business of engineering policies through the tax system. You seem to be breaking that here. Are you, and if so why, and will you do more of it?

FS: The first part of the question -- there is a list of assets that we plan to sell and/or securitise in the thick book we call the telephone directory. It contains the usual suspects - the two railway companies, the Airport Authority, tunnels, some government loans that we can securitise - so you can actually refer to that. I don't understand exactly what you mean by not engineering policy through the tax system. Can you be more specific?

Question: Paragraph 96 -- charitable donations and education, people being able to get a tax exemption. Some of your predecessors have said to me when I've said why not create exemptions for various things that they didn't want to use the tax system as a way of underpinning or underwriting various policies, but you seem to be doing that here. If not, can you say what it is you're trying to do?

FS: The government has always been using various policies, including fiscal policy, to kind of promote developments in the market. And I believe that the recommendation to set up a matching fund for donations to universities for non-capital works I think is in the right direction, in the sense that we really want Hong Kong people to give more to society. After all, Hong Kong's tax rate is very low and Hong Kong people have a tradition of giving as well, but in order to encourage them to do more, having this matching fund will hopefully encourage more of our citizens to donate more money to universities, which is critical in developing Hong Kong as a knowledge economy.

Question: If a business is showing a profit it can absorb a 1.5 percentage point increase in a number of ways, including passing along to the consumer. So ultimately middle-class people feel targeted whether you're intending to target them or not, and this is the group that polls show has the least credibility or declining credibility in the government. So what can you say, what can you do to persuade middle-class people that they really aren't being targeted and to get them on board.

FS: I think your argument is really stretching very, very far. I mean if you look at the other governments where their profits tax is much higher, say the United States it's over 30 per cent, sometimes over 40 per cent, you can't argue that they're passing everything to the consumers, so I don't think really your argument is a valid one.

Question: I'm sorry ... maybe I put it badly. The fact is, a business has different ways that it can try to deal with that if it is showing a profit. If middle-class people feel squeezed, and they do feel squeezed, how can you convince them that your Budget is fair to them if you in your own mind believe that it is.

FS: Well in business, which I have been in business for a long time, pricing and tax has no correlation.

Question: What about the people that I'm asking about who feel unfairly treated ... that's the point.

FS: Well since I do not understand your question, I can't answer it.

(Please also refer to the Chinese portion of the transcript.)

End/Wednesday, March 5, 2003

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Floor/ Cantonese/ Putonghua/English