Donald Tsang's new term policy speech

Yesterday, Mr Donald Tsang, Chief Executive of Hong Kong announced how he has decided to spend the HK$58.6 billion (US$7.55 billion) budget surplus accumulated in the last financial year and which is likely to be sustained after 6.3 per cent economic growth in the first half of 2007.

1. HK$5billion giveaway in the form of corporate tax and salary tax cut by 1 percentage point to 16.5 per cent and 15 per cent respectively in the fiscal year starting next April 2008
2. Rates for property owners totalling some HK$2.6 billion would be waived for the final quarter of the fiscal year
3. Plans to spend US$19 billion on infrastructure, including new links to China/Macau, potentially creating a quarter of a million jobs

Budget surplus may come and go. So the method of distribution should not be made permanent or difficult to reverse ie. in the form of tax cuts. Waiver of collection on a temporary basis in the waiver of property rates would have been more acceptable.

Are they trying to keep up with Singapore with direct tax cuts? The similarity ends there. Singapore raised its indirect tax rate from 5% to 7%. So where is Hong Kong's indirect tax?

Furthermore, from the economic standpoint, the economy does not need further stimulation with the tax cuts given the low unemployment situation in Hong Kong.

I am in favour of well-thought through infrastructural expenditures as they would be investments for the future of Hong Kong.

Mr Tsang, don't forget to tackle the issue of broadening the tax base which you gave up towards the end of your last term.

http://taxwithedgar.blogspot.com/2006/12/hong-kong-drops-sales-tax.html