THE tug-of-war between the Government and small brokers over share transaction costs is unlikely to end soon. The stamp duty on stock transfers is unlikely to be lowered from the existing level of 0.3 per cent this year, particularly because the Government faces the prospect of a deficit budget. Following the worldwide trend to reduce share transaction costs, stock brokers have long been urging a further reduction of stamp duty. They maintain that the current rate of 0.3 per cent has hurt the stock market's competitiveness by making it more difficult to conduct business in Hong Kong than in financial centres such as Singapore and London, where no stamp duty is charged. Proponents of a stamp-duty reduction contend that a lot of business has been driven to London because it is cheaper, citing the increasing amount of trading in Hong Kong-based stocks there. Secretary for Financial Services Michael Cartland said that the current rate would not impede Hong Kong's competitiveness because it was not the largest component of the transaction cost. He was referring to the high minimum commission rate that is charged to clients by brokers. Unless brokers are prepared to change the 0.25 per cent commission rate, the Government is unlikely to make further concessions. In fact, the Government has made an effort. The stamp duty has been brought down for three successive years. It stood at 0.6 per cent during the financial year 1991-92 and has been reduced to 0.3 per cent this year. The Stockbrokers Association chairman, Chu Chung-tin, said: 'We always hope the Government will lower the stamp duty, but we expect there will be no change this year.' Mr Chu said that the commission brokers charged could not be lowered because of the investment houses' increasing operating expenses. Accountants seem to support the Financial Secretary, Sir Hamish Macleod. They said that the current rate of 0.3 per cent did not appear to have impaired the growth of the Hong Kong market. According to the accountancy firm, KPMG's Peat Marwick, the Inland Revenue Department is likely to experience a drop in stamp duty revenues this year, as a result of the decline in property transactions during the latter half of 1994-95, and the drop in stock market turnover. The average daily turnover on the stock market which was about $3.6 billion has dropped substantially below the $5 billion mark, on which the Government's estimates were based. 'However, the Government did budget for a decline in income from this source of 26.6 per cent,' the accountants said. 'Hence the potential impact on the Government's surplus may not be catastrophic.'