Financial Secretary Donald Tsang Yam-kuen yesterday said the government would act as 'quickly as possible' to negotiate double taxation treaties with key trading partners. Mr Tsang, who was speaking at a joint American, French and Indian Chamber of Commerce luncheon, also defended the formulas for setting the Special Administrative Region's reserve levels. He said: 'I'm well aware that others may like to propose different formulas for setting reserve levels. I'm not proposing to die in the ditch over what I have set out, if good reason to change can be presented. 'But I do think that the guidelines that have been laid down have a reasonable, measurable basis. They let everyone know very clearly what we intend to do.' He said Hong Kong's reserves of $446 billion gave it 'huge advantages' both in the present circumstances and at any time in the future. 'First, we keep strong reserves that calm the fears of international financial analysts and investors. 'Second, we can use the interest from those reserves to maintain public investment while keeping taxes low. 'That means that when our economy is faced with painful adjustment, as it is today, it doesn't have to bear the added strains of higher taxes or lower public expenditure.' He said the Government's response to the economic difficulty was far more than merely sitting on its reserves. 'I did more than simply give assurance [in the Budget] that we would provide all the funding needed for the policy programme. All our actions are inter-related.' He said there could still be 'ships of speculators' prepared to attack the economy. 'This year we face more tough times. Many in the community have suffered losses. All of us face uncertainty. But of this I have no doubt, that if we keep our faith in the power of the free markets, Hong Kong will renew itself and move forward once again.' He also said the recently announced arrangements with the mainland for the avoidance of double taxation of income were the first hurdle in putting together a comprehensive range of treaties. If adopted, the order will have effect in Hong Kong for income arising in the tax year of assessment from April 1. Unlike possible future arrangements, the Hong Kong-China deal does not have an 'exchange of information' clause. Mr Tsang would not be drawn on potential taxation-treaty candidates other than to say that the United States 'could be one of them.'
