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Budget suggests leaving wealth with the people (with video)

    The Financial Secretary, Mr John C Tsang, has today (February 27) placed social responsibility, the challenge of an ageing population and sustainable development at the core of his fiscal policy.

      Delivering his first budget at the Legislative Council, Mr Tsang said the Gross Domestic Product (GDP) had grown by 6.3 per cent in real terms in 2007. For 2008, GDP was forecast to grow by 4 to 5 per cent, which is still higher than the average trend growth rate of the past 10 years.

    Although "cautiously optimistic" about Hong Kong's prospects, Mr Tsang warned that the slowdown in the US economy, the global trend of rising inflation, and measures to cool the Mainland's economic growth could all have a negative impact on the city. 

    "On the external front, globalisation and the emerging regional economy will bring increasing competition to Hong Kong," he said.

    Mr Tsang forecast a surplus of $115.6 billion in the Consolidated Account for 2007-08. For the Operating Account, he forecast a surplus of $63.7 billion.

    He said the higher-than-expected surplus was mainly due to revenue from stamp duty on stock transfers which generated $35 billion ($22.1 billion higher than the original estimates), stamp duty on property transactions which generated $14.6 billion ($5.1 billion higher), profits tax which generated $89 billion ($11.5 billion higher) and salaries tax which generated $37 billion ($7 billion higher).

    Capital revenue from land premiums in 2007-08 was estimated at $63.1 billion.

    In drawing up his spending and revenue plans, Mr Tsang said the allocation of additional resources focused on four main areas: promoting long-term economic and social development as investment for the next generation; supporting disadvantaged groups so as to improve their livelihood; returning wealth to the people to share the fruits of economic development; and providing for future challenges.

    Mr Tsang said that we should make good use of the large surplus for the greatest well being of the community.

    To share wealth with the people, Mr Tsang unveiled a  package of measures and concessions for individuals and businesses.

      Standard rates of salaries tax and personal assessment tax would be lowered one percentage point to 15 per cent, while profits tax would also be lowered one percentage point to 16.5 per cent for the 2008-09 financial year.

    Individuals and small and medium-sized businesses would receive a tax reduction of up to $25,000 on their 2007-08 tax bills, while personal allowances would be raised from $100,000 to $108,000 for individuals and from $200,000 to $216,000 for married couples.

    He predicted an underlying inflation rate of 4.5 per cent in 2008, mainly due to continued economic expansion and high global commodity prices.

    But he expected inflation could be curtailed to 3.4 per cent in 2008 upon implementation of various one-off measures proposed in the Budget.

    These will include waiving of rates for 2008-09 (subject to a $5,000 ceiling per quarter), which will cost the government $11.2 billion, a one-month rental waiver for public housing tenants, which will cost about $1 billion and a grant of $1,800 for each domestic electricity account which will cost about $4.3 billion.

    In drawing up the Budget, Mr Tsang said he adhered to three basic principles: commitment to society,  sustainability and pragmatism.

    He highlighted an ageing population as the biggest long-term challenge facing Hong Kong.

    In this regard, Mr Tsang pledged to allocate $50 billion from the fiscal reserves to assist the implementation of healthcare reform initiatives.

    Mr Tsang said that the number of elderly people was expected to increase from the current 870,000 to about 2.17 million by 2033.

    He added that the ageing population would also put immense pressure on public finances.

      "An ageing population will impose limitations on the production capacity of the economy. We must attract talented people from the Mainland and overseas to give fresh impetus to our economy and improve our population structure."

    Mr Tsang also announced several initiatives to help the elderly, including the upkeep of their homes and providing additional elderly care centres.

    He said the Government would continue to invest heavily in education and retraining and in creating more favourable conditions to attract talent from around the world to enhance Hong Kong's competitiveness. 

    To further boost the tourism and convention and exhibition sectors, Mr Tsang earmarked $150 million to attract more large-scale conventions and exhibitions to Hong Kong over the next five years.

    He also proposed waiving Hotel Accommodation Tax to enhance the competitiveness of the hotel industry.

    The Budget also said the Government would include 10 sites on the Application List explicitly to build new hotels.

    In a move to promote wine trading and distribution businesses, the Financial Secretary proposed exempting duties on wine, beer and other alcoholic beverages except spirits.

    He said Hong Kong's geographical location, advanced transport and logistics infrastructure and rich experience in international promotion were favourable to the development of trading, storage and distribution of quality table wine.

    The move would cost the government $560 million a year in lost revenues, but could add as much as $4 billion to total business volume in trading, storage and auction of table wines.

    On promoting a more caring society, Mr Tsang proposed additional annual funding of about $40 million to help victims of domestic violence.

    He also earmarked $53 million to tackle the problem of psychotropic drug abuse by young people.

    "I understand that Hong Kong as a whole has to face many challenges brought about by rapid changes in the global environment," Mr Tsang said.

    "I am sure that our society can face those challenges with the same measure of resolve and determination as in the past. The Government will endeavour to help relieve the difficulties we may all encounter."

Ends/Wednesday, February 27, 2008
Issued at HKT 13:23


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