Deloitte is proposing measures mostly benefiting the middle class. They include widening tax bands by one-third and reducing the top two marginal tax rates to 2002-03 levels, and reducing the standard rate of tax, paid by high-income earners, by half a percentage point. It proposes bringing more people into the salaries tax net by reducing the basic tax-free allowance by 10 per cent to HK$90,000.

It is also proposing an additional child allowance of HK$40,000 in the child's first year, senior tax partner Yvonne Law Shing Mo-han said.

Mrs Law said the measures would cost the government between HK$4 billion and HK$5 billion a year. Companies should also benefit from the government's strong fiscal position. Mrs Law suggests corporate tax rates be lowered by half a percentage point, to 17 per cent for incorporated companies and 15.5 per cent for unincorporated businesses. A further cut should be considered if the economy continues to perform strongly.

Rival Singapore has announced it is ready to cut its profits tax rate if Hong Kong does the same.

Meanwhile, the Federation of Trade Unions unveiled 10 measures it wants Mr Tang to adopt. They include buying back the Route 3 toll road and Western Harbour Crossing at a cost of HK$30 billion.

Federation lawmaker Wong Kwok-hing said the government could lower tolls to get more drivers to take 'underused' routes.

It also wants tax allowances for children and dependent parents increased, and tax breaks for new graduates.

Deloitte's proposals

Cut standard tax rate from 16 per cent to 15.5 per cent

Widen tax bands from HK$30,000 to HK$40,000

Reduce the top two marginal tax rates from 19 per cent to 17 per cent and 13 per cent to 12 per cent

Cut the basic tax allowance by HK$10,000, to HK$90,000

Additional child allowance of HK$40,000 in year of child's birth

Cut profits tax rate by 0.5 per cent

Source: Deloitte Touche Tohmatsu