Cautious Budget seen

PUBLISHED : Tuesday, 13 February, 1996, 12:00am
UPDATED : Tuesday, 13 February, 1996, 12:00am

TAX experts at Deloitte Touche Tohmatsu see the Government announcing minor tax cuts and better-than-expected revenues in the forthcoming Budget.

Improved revenues from the rise in property prices and the stock market rally were expected to have turned the forecast deficit of $2.6 billion to a surplus of $2 billion, Deloitte said yesterday.

The surplus should increase to about $10 billion during the 1996-97 financial year - a 40 per cent improvement on initial estimates, it said.

Both companies and individuals would benefit from minor cuts in corporate and personal taxes.

Tax partner Yvonne Law said profits tax should fall from 16.5 per cent to 16 per cent while salaries tax would also fall by half a percentage point to 14.5 per cent.

'I expect it to be cautious and conservative,' she said.

'The change in financial secretaries to Donald Tsang [Yam-kuen] will not make a big difference. It will try and give a bit to everybody.' Single and married allowances are also expected to be increased, to about $90,000 - or by about $12,000 - for single taxpayers and by $24,000 to $180,000 for married couples.

Mrs Law expected an increase of about 10 per cent in indirect taxes.

While anticipating a conservative package, Mrs Law believed the Government should attempt to strengthen the territory's attractiveness as a centre for business.

'Hong Kong's effective tax rate is comparatively higher than its neighbouring cities like Beijing, Shanghai and Singapore,' she said.

'Tax holidays or reduction of tax rates should be made available to certain qualified enterprises such as capital intensive manufacturers, industrial research and development, financial institutions and operational headquarters.' Tax principal Jefferson VanderWolk said a 5 per cent gross domestic product growth was expected to continue during the next few years.

He said the Government was under pressure to keep inflation low, which would mean a cautious approach to spending.

'As for the proposed bill to discontinue deduction and depreciation allowance to private car owners, the Government should look to other methods such as an increase in licence or registration or the introduction of the electronic road pricing system as a means to solve the traffic congestion problem,' Mr VanderWolk said.

Other measures, such as a 150 per cent reduction on high-technology research and development, were also called for to stimulate foreign investment and tackle unemployment.