The Government will review depreciation allowances as part of a study of taxation laws, Treasury Secretary Kwong Ki-chi said yesterday. Mr Kwong, speaking at a French Business Association lunch, also ruled out the introduction of a Singapore-style capital gains tax to stamp out property speculation. Mr Kwong defended the Government's recent Budget and dismissed the 'disconcerting trend' for the public to focus on social security spending and the surplus. 'I believe it would be fair to say that anywhere else in the world, such a Budget - higher spending, lower taxes, healthy surplus - would be the cause for celebration and congratulation,' he said. 'Yet here, there has been a chorus of criticism on one single issue - comprehensive social security assistance payments for the elderly - and little debate on all the rest of the Budget. This lack of balance in the domestic debate is disconcerting.' He said there was persistent misunderstanding that bigger budget surpluses meant more funds available for spending. 'The expenditure ceiling is derived from our long established guidelines of keeping growth in spending in line with the growth in the economy - a guideline now enshrined in the Basic Law,' he said. 'A larger surplus does not allow us to breach that guideline. Rather, it provides us with greater scope for one-off investments and for reducing taxes further.' He said additional taxation cuts would have sent the wrong signals to the economy during a period when inflation was rising. 'We have resisted the calls that arose from some during the consultation exercise last autumn for profits tax to be increased or set on an increasing scale,' he said. 'Our headline tax rate is still among the lowest in the advanced world. Our effective tax rates, even after allowing for all the special gimmicks that some other places allow, are still extremely competitive.' Hong Kong profits tax is 16.5 per cent for companies and 15 per cent for non-incorporated businesses. Barry Macdonald, tax partner at Coopers and Lybrand, said companies can claim a depreciation allowance for plant and machinery of 72 per cent in the first year and 30 per cent in the following years. Mr Macdonald said current allowances were among the most generous of any major economy. He said that the review was likely to make application of the allowances simpler. Mr Kwong ruled out introduction of taxes designed to stamp out property speculation. He said: 'Capital gains is an unspeakable term in the Hong Kong Treasury's vocabulary.'