OKAY, FREDDY, LET'S do just that. But before we start talking about goods and services tax as a way of doing it, let's set up the government's finances properly to do it.

First item of business is accruals accounts. At the moment we do all our fiscal numbers on the basis of cash accounts only, a simple money in, money out system.

Accruals accounting, increasingly being adopted by governments around the world, sets expenditure against the associated revenue and gives a much more accurate picture of fiscal position.

Our government has also started to put together accruals accounts. Among other things, they show that our fiscal deficits in recent years were less than what the cash accounts show. Leave this aside, however. The point here is that our bureaucrats have made their case for GST on the basis of cash accounts only. Why scorn the better way of doing it?

For instance, one thing accruals accounting would do is put pressure on government to account properly for civil services pensions. These are largely unfunded at the moment. Why not set aside a sum for our fiscal reserves to fund them and then talk about the need for GST again?

The biggest problem, however, is that the budget is split rigorously into an operating side and a capital side. The two do not touch each other. Revenue from capital sources (property for instance but not, for some reason, investment income) can be used for capital works only.

It's an odd way of doing things conferred on us by a financial secretary 25 years ago whose budget forecasts were way off the mark. He blamed his tools rather than himself and cobbled together his own tools to give legitimacy to his excuse. We are still burdened with the results of this, a burden we should re-examine before examining GST. But it can be convenient for the likes of Freddy Ma when trying to justify GST. Here are some rather misleading statements from his opinion piece on Monday:

'Our tax income is derived mainly from salaries tax and profits tax, which make up two-thirds of the total collected.'

It all depends on what you mean by tax, Freddy. It is more narrowly defined in Hong Kong than elsewhere. When you include capital revenue and some other non-tax items, you find salaries and profits taxes make up 40 per cent of government revenue, not two-thirds.

'Our tax base is very narrow.'

Our tax base, perhaps, but not our revenue base. Our revenue base includes property sales and investment income from fiscal savings. Other countries do not have anything like it. Our revenue base is very broad. If our tax base is narrow, it is only because your definition of tax is narrow, Freddy.

'Salaries tax is paid by only 1.2 million [people].'

You would think the solution to this problem is to bring more people into the salaries tax net. But, no, the big proposal is rather that we use GST revenue to take more people out if it. Good one.

'Land premium has fluctuated between HK$5 billion and HK$35 billion.'

And it will continue to fluctuate that way after we adopt GST. We will still sell land and leasehold rights as we have always done and still try to get the best prices we can for them. GST will do nothing to change this volatility.

'Where profits tax is concerned, out of about 750,000 registered businesses, the top 800 pay 60 per cent of the total.'

Judging by these figures, 800 corporations make 60 per cent of total corporate profits and the remaining 740,200 make only 40 per cent.

This tells us that some of our big companies are very big indeed and that we have a lot of small companies that are very small indeed. This is the way the corporate world breaks down in most places. Hong Kong is not unique.

But are you perhaps trying to tell us, Freddy, that some of these small companies are not paying even their small fair share of the tax?

If so, you have a problem of revenue enforcement, not revenue structure, on your hands. If not, what is your complaint?

I could go on with the thoughts of Freddy but they consist only of the same old half-truths that our bureaucrats have trotted out ever since proposing GST.

They propose it because GST is the fashion these days, not because we need GST but they are, in fact, not even ready to propose GST until they do so from a basis of accrual accounts that take their total revenues into account.

They have not even begun to do so. Misleading statistics are much easier.