Following is the transcript (English portion) of the question and answer session given by the Financial Secretary, Mr Henry Tang, during his Budget press conference today (February 28):

Reporter: A number of the measures in this are temporary one-offs. You also said you want to leave room for the next Administration. So have you constructed this Budget with a lot of temporary items so the next Administration will be left with a kind of dowry that can be used to purchase hearts and minds in the next Administration?

Financial Secretary: The package of tax relief and one-offs comes to about $20 billion this time. Of the $20 billion, about $5.2 billion is recurrent, and the rest, about three-quarters of it, is on a one-off basis. The reason I have done it that way is, first of all, because this is the last Budget of this term. But at the same time I have to ask myself how do I share the wealth with the community but at the same time maintain prudent fiscal management. I believe that by giving out tax relief, three-quarters of it being one-off, is the best way where we can share the wealth with the community but at the same time maintain fiscal discipline.

Reporter:  Mr Tang, your term ends on the 30th of June. Can I just have your thoughts on the rumours that you are to become Chief Secretary.

Financial Secretary: Well, like you said, it is a rumour and I can't comment on a rumour.

Reporter:  Some lawmakers have been criticising the reason for you giving so many sweets to the public this time is because it is paving the way for the Chief Executive election for Donald Tsang. What is your response toward that and also, will you consider to be the Chief Secretary after you get your job done?

Financial Secretary: Do you guys pass notes to each other so you ask the same question? That's surely a rumour and as far as I am concerned my responsibility is to make sure that I get my job done properly and my term ends on June 30, 2007. I wouldn't exactly call these sweets. They are tax relief or tax rebate measures. They are meant to share the wealth with the community but at the same time maintain fiscal discipline. So the fact that out of the $20 billion package only about one quarter is on a long-term recurrent basis and the other three-quarters is on a one-off basis, I think it strikes a balance of maintaining fiscal discipline, but at the same time sharing wealth with our community.

Reporter: But do you think it is kind of risky given that the Stock Market is so volatile these days?

Financial Secretary: I think it's a fairly prudent treatment because this year we will show a $55 billion surplus.  So giving back $20 billion to the community strikes a very good balance of maintaining a meaningful share of the wealth in the community but at the same time without placing undue burden on a recurrent basis because three-quarters of it will be one-off.

Reporter:  I think I want to bring out an issue from the vault that I know has been pretty much committed to the bottom of the harbour if you will but GST, and given the fact that the Budget surplus and the political environment, any talk of GST is a actually moot point. But do you see any situation going down the road where there is definitely a need to widen the tax base and that a GST of some sort would be a possibility down the road. And picking up the issue that one of my colleagues brought up, is the fact that we have that sudden market sell-off in recent days, would you say it is a timely reminder that keeping surpluses in hand are a good idea.

Financial Secretary: I think prudent fiscal management is something which every Financial Secretary should always adhere to and that I have done so in formulating this Budget as I had in my previous Budgets. I think I have done the right thing by maintaining our fiscal prudence because the present healthy fiscal situation is not just a result of buoyant economic growth but also a result of very tight and very prudent fiscal management within government that we are now very careful about where we spend money and very careful about how we spend taxpayers' dollars. Just to give you an indication, government expenditure as a percentage of GDP is always a very good indication of how governments spend money and how big a government is or how small a government is. In Hong Kong we are now about 17% and in the next few years we will be about 17% or even a little bit less compared with OECD's average of 40.8. I think we’ve done pretty well with our tax dollars. We have a first-class health care service, excellent education and free, or nearly free. So we have done really well with our world-class infrastructure and with our tax dollars.

     Coming back to the need to broaden our tax base, I remain firmly convinced there is a need to broaden our tax base because our revenue is volatile. Although by changing the sharing arrangement on our investment income I will have stabilised one of the volatilities. But our tax revenue, whether it's salaries tax, profits tax or land revenue, remains volatile, so these are the very intellectual questions where one face the need to broaden a tax base. Thirdly, we have stopped using Victoria Harbour as our dumping ground for many many years, so the GST proposal is not at the bottom of Victoria Harbour. We thank the public for giving us their views but I think this exercise is not lost because we have convinced the public of the need to broaden our tax base and the public supports us to continue this discussion to search for ways to broaden our tax base.

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

Ends/Wednesday, February 28, 2007
Issued at HKT 20:58

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