Henry Tang to consider tax cuts with caution
The financial secretary warned against hasty tax cuts yesterday, saying he would need to take into account the risk of a bird flu outbreak and other economic uncertainties.
Announcing the annual budget consultation exercise, Henry Tang Ying-yen said he was adopting a wait-and-see approach on tax relief.
'The chief executive and I have said that subject to the economy, there will be room for tax cuts. The economy in the first half of the year was quite good. But we still have to wait for the second half,' he said.
Apart from uncertainties like rising interest rates and oil prices, Mr Tang warned of the impact of a possible outbreak of bird flu.
'We have seen the impact of an epidemic on the economy two years ago. If we were hit by bird flu, our spending on public health would surge. All in all, we are still in a state of wait and see,' he said.
'While we stay alert, we urge people not to be too worried,' he told the Legislative Council's financial affairs panel.
He said the top 100,000 taxpayers still contributed 58.2 per cent of salaries tax in 2005-06, while the top 600 firms of 57,000 paid 60 per cent of the total profits tax.
Government recurrent expenditure has surged $72 billion, or 56.8 per cent, over the past 10 years, but operating revenue has only grown $36.4 billion, or 25.1 per cent, according to Mr Tang.
He pledged to give an account of the public consultation on a goods and services tax in his February budget.
But unionist legislators called for more tax relief, and higher welfare and education spending.
Lee Cheuk-yan, of the Confederation of Trade Unions, said top companies could afford to pay higher tax rates.
'You should introduce progressive profit tax. At present, a grocery store and a firm making $100 million profit pay the same tax rate,' he said.
