City comes close to balancing the books, says finance chief

PUBLISHED : Thursday, 28 April, 2005, 12:00am
UPDATED : Thursday, 28 April, 2005, 12:00am

Increased revenues lead to deficit of only $4.6b; tax cuts possible if economic recovery continues

The government almost achieved an unexpected balanced budget in the past financial year due to increased tax revenue and better-than-expected cost-cutting efforts.

Announcing the financial results before Legco endorsed this year's budget, Financial Secretary Henry Tang Ying-yen also said he would consider cutting salaries tax when the economy had improved further.

Public coffers collected $263.6 billion in revenue, resulting in a $21.4 billion surplus after deducting spending of $242.2 billion.

Taking out the $26 billion in one-off revenue raised by government bonds issued last year, the administration recorded a slight deficit of only $4.6 billion.

The nominal surplus was $9.4 billion more than originally estimated when Mr Tang made his budget speech in March. The discrepancy was due to increased revenue from salaries tax, stamp duty and land premiums, plus a $7.5 billion reduction in spending.

Government reserves also increased $20.7 billion, reaching $296 billion, compared to $275.3 billion on March 31.

Mr Tang said that after the spending reductions and tax-raising exercises of recent years, the structural deficit problem had been successfully tackled. But he warned that the cost-cutting exercise should continue with a view to achieving a solid, balanced budget.

'The patience and commitment of the community has paid off with the gradual decline of the deficit,' he said.

'Decline, however, does not equal elimination. We should never forget the painful experience of being beset by serious deficits not so long ago. We must stay alert to the challenges ahead.'

Mr Tang said most members of the public believed the government should not substantially cut taxes and should manage public finances prudently.

He pledged that tax cuts would be introduced if the economy continued to improve.

'As our economy gradually picks up, some citizens are looking to the government for tax concessions,' Mr Tang said.

'Once the economic recovery takes stronger root, I will consider it.'

Under mounting pressure from main political parties - which have criticised the caretaker government for not giving substantial assistance to the poor and the middle-class in the budget - government ministers made a rare show of unity and took turns speaking in the Legco debate.

Acting Chief Executive Donald Tsang Yam-kuen led his team of 13 ministers to defend each policy area. The Appropriation Bill was passed by 48 to six votes after the three-day debate.

Pro-government parties also voted down three amendments moved by the Democrats seeking to scrap funding for the Constitutional Affairs Bureau and the Office for Complaints against Police.

During the discussion, Democrat Cheung Man-kwong said Secretary for Constitutional Affairs Stephen Lam Sui-lung had done nothing to promote Hong Kong's constitutional development and had failed to set a timetable for constitutional reform.

The secretary fought back, saying the legislator's standpoint was inconsistent.