THE decline in the proportion of taxpayers among the workforce should not cause alarm because Government revenue from direct tax remains stable, Financial Secretary Donald Tsang Yam-kuen said yesterday. Although the revenue base will drop with the tax breaks in the Budget, Mr Tsang said this was not a cause for concern. Direct taxes, including salaries tax, continued to contribute a stable proportion of the Government's revenue - about 40 per cent. 'When we listen to people saying that our revenue base will become weaker, I don't think that is an argument that can be substantiated. Of course, a wider revenue base might be better.' Mr Tsang said the growth in the economy would generate more revenue and it was reasonable for the Government to return some money to taxpayers through allowances. Widening the base - collecting tax from more people including the less well-off - was viable theoretically, but politically and economically unrealistic. 'I don't see how the public and Legco will support the idea of asking more people to pay tax,' said the Financial Secretary. The proportion of taxpayers dropped from 54 per cent to 40 per cent in the past three years, with the number down from more than 1.4 million to about 1.2 million. The breaks offered by Mr Tsang could bring the proportion down to 39 per cent. He offered a 14 per cent increase in basic allowances, from $79,000 to $90,000. With other new tax breaks such as allowances for siblings and for training costs, the number of taxpayers could go down further. Mr Tsang disagreed with suggestions the increase in social security payments would discourage people from working. There had been strong demand to increase the payment. It was the Government's responsibility to provide a safety net for society. The benefits provided should not reach a level which would encourage people to remain on the dole. There had to be more co-operation with China on the 1997-98 Budget and it did not matter much who took the lead, Mr Tsang said. There were common objectives for both sides in the next Budget, such as ensuring a smooth transition as well as reflecting the wishes of the Hong Kong people. He declined to respond directly to criticisms by the pro-China press that the Government was spending too much over the last two years of transition and leaving a lot of problems for the Special Administrative Region government. Mr Tsang said that his team had taken into account views expressed by China.