Mr Chairman, ladies and gentlemen,

Thank you for again inviting me to your annual luncheon.

We have an auspicious and memorable occasion to celebrate today. Not because this is our first gathering after the reunification and the establishment of the HKSAR, or even the third time I speak to you as Financial Secretary. It is because this year marks the 50th anniversary of the Board of Review, which was constituted in 1947 upon enactment of the Inland Revenue Ordinance. I therefore wish first to take this opportunity to congratulate the Board on its golden anniversary, and to express my deep gratitude to the chairmen, deputy chairmen and members, past and present, for their contributions to the work of the Board, which is an essential element in the operation of a fair and equitable taxation system.

While I was preparing this speech, I asked myself the question "Has anything changed with respect to taxation since Hong Kong entered into the new era after the transition?" Let me first go back in history. The first ever report on Hong Kong's revenue was published on 11 April 1846. It recorded that revenue rose from 9,534 pounds in 1844, to 22,242 pounds in 1845, a more than 100 per cent increase. This no doubt marked the beginning of a trend of healthy revenue growth. While there were no doubt ups and downs over the past 150 years, we have managed to sustain this healthy trend through the transition. We estimate that total Government revenue receipts in 1997-98 will reach $235 billion, and our fiscal reserves will exceed $400 billion by the end of this financial year. Clearly a very healthy revenue position and so, no change on the revenue front, though the growth rate might not be as spectacular as that in 1845.

Indeed, nothing substantial has changed on the taxation front. We still have taxes, and we will continue to collect them with vigour. But more important, it is our continuous and firm commitment to maintain a low, simple and predictable tax regime. And I can assure you that we are going to keep our tax law very, very much simpler than the 9,451 pages of the US tax code, to which the latest budget agreement in the US added another 285 new sections and 824 amendments. However, human nature being what it is, no matter how light we keep the taxes and how simple we keep our tax law, there are bound to be taxpayers who would consider their tax assessment unfair. They are bound to raise objections and appeals. It is important that the Board of Review can continue to deal with these cases efficiently and impartially.

Last year was a challenging year for you all, especially the Chairman, Mr Ronny Wong, who took over the chairmanship of the Board from Mr Bill Turnbull. The number of appeal cases received has continued to increase substantially. The Board now receives on average 24 appeal cases each month. Just for the first half of this financial year, the Board has already received more cases than the total number received in a full year three years ago (1993-94). To cope with the increase in caseload, the Board has recently been scheduling on average 20 or more hearings a month, as compared with eight hearings per month in 1993-94. You can rest assured that I and my colleagues will continue to give our best support to the Board in the discharge of its statutory functions.

There are many factors leading to an appeal to the Board. For example, despite our relatively simple taxation system, there may well be areas which are not sufficiently clear and which may give rise to disputes over tax assessment. As you will be aware, we are currently conducting a comprehensive review on profits tax to examine whether we can make our taxation system and business environment more competitive. The public consultation period ended in early September. Some of you may have expressed your views on the review and suggested how the system can be improved. We will carefully analyse and examine all the views received. One area which we must certainly address is to enhance certainty in the operation of the taxation system. This should help to clear grey areas in tax assessment and reduce the opportunity for disputes, and thus the need for appeal. I am confident that by doing so we will be able to bring some relief to the Board.

We recently amended the Inland Revenue Ordinance to allow settlement after an appeal has been lodged with the Board. In that way, a case could be resolved without a Board hearing and the Board's time and resources could be re-allocated for hearing other cases. We also amended the law to allow greater flexibility in the timing for the referral of an appeal lodged with the Board to the High Court if there are sufficient merits. All these improvements would help to streamline the work of the Board and strengthen its productivity. I also note that the Board has made various initiatives to improve its operations, and these have borne fruitful results. The pre-hearing review for complicated cases is one of those initiatives which has proven to be very successful. It has helped to resolve complicated cases in a more efficient manner, and has allowed the Board to handle more cases. We have already amended the Inland Revenue Ordinance to allow the Board of Inland Revenue to make rules on the pre-hearing review so that the procedures involved can be formalized. We expect that the rules will come into being once the first SAR Legislative Council is in place.

I should also congratulate the Board for having successfully introduced the use of Chinese in Board proceedings. The number of cases heard by the Board in Chinese has increased substantially. Up to now, more than 20 appeals were heard in Chinese during this year. This has helped to expedite the Board proceedings as the taxpayers concerned can now express themselves in the language with which they are most familiar.

I know that we have also made great efforts to publicize the Board's decisions, which we can now find on the Internet. We are exploring various means to widen the circulation of the Board's decisions to the legal, accounting and business sectors. These will enhance the awareness of tax practitioners and taxpayers in relation to the operation of the Board.

I have been told that a good Financial Secretary must first learn to make speeches. Then he gets wiser and learns how far his speech should go and when it should end. As a wise Financial Secretary, I know I should stop now. But let me now propose a sincere toast to everybody to celebrate the golden anniversary of the Board of Review.

Thank you and congratulations.