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Following is the transcript (English portion) of remarks by the Financial Secretary, Mr Henry Tang, on the final report of the public consultation on tax reform at a media session at the Central Government Offices this morning (June 12):
Financial Secretary: This morning I briefed the Executive Council on the final report of the public consultation on tax reform. We will now report the major results of the consultation. In the nine-month consultation, we received 2,400 written submissions and we have also attended many public forums where we explained and elaborated on the details of the consultation. From the views collected, we found the public have gained a better understanding of the challenges of a narrow tax base, and agree that these challenges should be addressed. While the public agreed that a GST can effectively broaden the tax base, we have failed to convince the public that this is the most appropriate way to broaden the tax base at this stage. The public have also suggested various other options such as green tax, land departure tax, as well as progressive taxes on both salaries tax and profits tax.
While our economic environment has improved substantially, Hong Kong still faces many challenges in the long-run. Under globalisation, our education and manpower training needs to be further strengthened and also because of our ageing population both social welfare and health care expenses will pose long-term challenges, so we have suggested the Government should follow up and consult the public on health care financing as soon as possible.
The final report recommends four points. First, the Government should continue to study options for broadening the tax basis and address the fundamental issue at a suitable time in the future. Second, studying the options for broadening our tax base, the Government should take into full account the views collected in this consultation exercise and consult the public further on options that are more practical. Third, the problem of ageing population is becoming more serious and will bring additional challenges to our public finances, so the Government should consult the public on health care financing proposals as soon as possible. Lastly, to enhance our overall competitiveness on a global scale, the Government should continue to advance education and manpower training and explore sustainable financial arrangements so we can respond suitably to the needs of the longer term challenges. All the information and the full report will be uploaded onto our website later today.
Reporter: In summary, are you basically saying that except for looking at some way to finance health care you are shelving any discussion on broadening the tax base for the time being?
Financial Secretary: No, if I may use that same point: the Government should continue to study options for broadening the tax base and address this fundamental issue at a suitable time in the future.
Reporter: The options preferred by the public according to your consultation are options that you rejected when you came forward with the GST as being preferred. Now the public has rejected that and you failed to sell it. So it would appear that the situation is either stymied or you are going to have to accept some options that were among the options you rejected in the past, so what's the way forward?
Financial Secretary: When we launched the consultation on broadening our tax base, we felt that a goods and services tax is the most viable way forward, but unfortunately we have not been able to convince the public that this is the best option available. So in the broadening the tax base document that was submitted to the previous Financial Secretary, it has examined other various options. Now the public feels that since we agree that there are long-term challenges and there is a need to broaden our tax base, why not examine those other options? We agree with that. Therefore we felt it maybe a good time so we can examine all the options together.
(Please also refer to the Chinese portion of the transcript.)
Ends/Tuesday, June 12, 2007
Issued at HKT 15:26
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