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Following is the transcript (English portion) of a question and answer session by the Financial Secretary, Mr Henry Tang, at a luncheon organised by the Federation of Hong Kong Industries today (August 22):
Question: Thank you for allowing me to ask the first question, and I hope you can understand my question. I was thinking of whether I should translate for you.
Well, Henry, you said that your first and primary goal is to revitalise the economy. You have also said you need to address the budget deficit. Could you share with us, Henry, how are you going to balance these two seemingly conflicting goals?
FS: Thank you, Jeff. Nothing like a difficult question as the first one. The two are seemingly conflicting goals. I have said that my first and foremost priority is to improve our economy. But in fact the two are actually reinforcing each other. We need to strike a prudent fiscal policy in order to achieve a fiscal balance, because a strong fiscal discipline will provide a stable environment for investment and other economic activities. However, in the course of achieving this prudent fiscal policy, my eyes will always be on the ball - not necessarily the crystal one, but my eyes will always be on the ball - I'm sure that as a golfer you understand this very well - that the way out of this is by improving our economy. We are a very externally oriented economy, we are subject to many forces that are beyond our control. But I do believe that having a prudent fiscal policy and consistency in the policies that we lay out will encourage business to invest. Not to mention, I said a little while ago that many businesses have found that to operate in Hong Kong sometimes they spend a lot of money on compliances, whether it is licensing, whether it is other aspects. This is something that we will look at to see how we can make Hong Kong more business-friendly, and so again I think this will encourage investment as well.
Question: Henry, I'm not going to ask you any more questions about your wine collection, even though as I read from the newspaper there is public interest in whether you need to enlarge the wine cellar in you new house to hold all your bottles of wine. Henry, my real question to you is, you have repeatedly talked about your strong belief in greater transparency and responsiveness, and yet the public usually if not always has divergent views, so how are you going to build consensus in our society?
FS: I'm so glad you are not asking a question about my wine. I have fears that the 80 per cent duty that we collect on wine is going to be the hardest question I face in the budget. It's not the fiscal deficit, not the tens of billions of dollars we are running as a deficit, but since I have about half of my wines in Hong Kong duty-paid, the other half in the UK not duty-paid, if I reduce the duty people will say it's because I want to import my wines at a cheaper price; if I increase the duty, then people will accuse me of boosting my own assets. And this is a very good illustration that our community does have very divergent views! Whatever I do can be criticised or subject to views one way or the other. I just take wine as an example because on many issues the balance that I will have to strike will be a very delicate and a very difficult balance. But I do think that transparency and communication are probably the way to get as many as possible to understand why and the background of what I am doing. I could never please everyone at the same time. It would be unrealistic for me to expect that I can please everyone at the same time. Indeed, when you pay tax you always feel, no matter how low the tax rate is, it's never low enough. Is CEPA enough? It's never enough, because it's like asking someone do you have enough money in you bank account...it's never enough. You can always strive to do more, but I think there is a certain degree of reason, a certain degree of what is the balance that we are trying to strike. So I think that by increasing transparency and also better communication with the community, with business, all sectors of the community to explain and understand better where I'm coming from. I only ask for that. I will respect a difference of opinion. Therefore, I respect differences in views, you may not be entirely happy with me, but please respect my views.
Question: My question is to follow one of your earlier comments regarding GST. Can you further elaborate on the GST and do you have a timeline for that?
FS: I raised the subject of GST in the so-called "silly season". The way we define the silly season is when school is out, they have not very much to do, Legco is out so the Legco members are a little bit freer, there's not much happening so the papers are all hungry for something to write about. I have been warned that I should not raise any controversial subjects during the silly season but I have chosen to do so. The reason I have chosen this moment to do it is that while I have said repeatedly that we have the determination to achieve a surplus in our fiscal budget, we also eventually need a tool to have a broad-based and stable taxation regime. Of the 146 WTO members, more than two-thirds of them have some sort of a GST - a goods and services tax. I understand very well that the timing to introduce it is not now, is not anywhere in the near future, because it will depress our economy, it will tax people at a time when they cannot afford it, and it will drive our deflation even further. It is definitely a deflator, so I understand very well that the timing is not to do it now. I have no intention of doing it right way, I have no intention of doing it anywhere in the short term because the internal task force is still looking at it and until we get a think piece, which I think will be at least next year, there is still a whole series of consultations as well as discussions before the law is even drafted. And after the law has been drafted and introduced into the Legislative Council if we are going to go ahead and do it, it will be such a controversial piece of legislation, it will require quite a lot of discussion time. So I do not envisage any time soon. However, we cannot ignore it. It is a broad-based tax, it is a stable taxation and it taxes the rich the same as it taxes the poor, on a consumption basis. So the more you spend the more you pay on tax, the less you spend the less you pay on tax. And also it's not as if there are no precedents. There are many different kinds of this kind of taxation in the world, where they take care of the less well off. In Australia, some of the food is not taxed, in England things for babies are not taxed and some food also is not taxed. So there are all sorts of ways where you can address special needs. But I do have to raise this subject because I do have to show, not just to us but also to the international community, to IMF and to all the Soros's and those people out there, that we do have that determination and we will have that tool and we are considering that tool to balance and indeed to achieve a surplus in our budget, and that was the reason I put it. I do not have a deadline for when it has to be introduced.
(Please also refer to the Chinese portion of the transcript)
End/Friday, August 22, 2003
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