No tax breaks likely from Sir Hamish

PUBLISHED : Wednesday, 02 March, 1994, 12:00am
UPDATED : Wednesday, 02 March, 1994, 12:00am

FINANCIAL Secretary Sir Hamish Macleod's Budget today is not expected to provide many surprises, with most taxes unchanged or increasing by the rate of inflation.

''It will be a dull budget,'' said Coopers & Lybrand partner Tim Lui, summarising the viewpoints of many awaiting Sir Hamish's third financial statement.

Perhaps the most interesting issue promises to be the size of the 1993-94 surplus.

The figure is estimated at between $8 billion and $20 billion, compared with Sir Hamish's original forecast of a $3.36 billion deficit.

In the 1992 budget, Sir Hamish predicted a surplus of $7.5 billion, but under-spending saw it blow out to $20.5 billion.

It is expected Sir Hamish will try for another deficit budget. Last year, he set the deficit at $16.6 billion in 1994-95, $13.29 billion in 1995-96 and $7.9 billion in 1996-97.

A cut in the 17.5 per cent corporate profits tax has been called for to assure investors that Hong Kong is a low-tax centre, but it is unlikely as a one percentage point cut would cost $2 billion in revenue.

Salaries tax is expected to stay at 15 per cent, while the basic allowance is expected to match inflation by climbing from $49,000 to $54,000.

Given the enormous extra revenue the Government has received from stamp duty on stock transactions in the current fiscal year, Sir Hamish could lower the stamp duty again.

Last year, it was reduced from 0.2 per cent for each party to 0.15 per cent, but government revenue increased because market turnover soared to between $6 billion and $10 billion.

However, Sir Hamish could be tempted to leave the rate unchanged as he expected the investment community to lower its costs when he reduced the stamp duty last year, and this did not materialise.

It is unlikely to be a pleasant day for those who like liquor, cigarettes and cigars, with duties expected to climb again.

The specific duty on liquor is likely to increase from $80 a litre to between $85 and $100, while the value-added tax could rise from 35 per cent of the cost including freight to up to 37.5 per cent.

The import tax on tobacco is expected to climb from $580 per 1,000 cigarettes to between $610 and $650 and on cigars from $745 to $820.

Another revenue booster will come from the first registration tax for vehicles, which is expected to go up by 20 per cent.