Deloitte partner rules out immediate sales tax move

The Government is unlikely to introduce a sales tax within the next few years due to technical difficulties and potential public opposition, according to accounting firm Deloitte Touche Tohmatsu.

A sales tax could broaden Hong Kong's narrow tax base and provide a stable source of income for the Government, partner Anthony Tam Chun-hung said.

However, in-depth studies had to be done on how the tax could be collected fairly and economically before it could be implemented, Mr Tam added yesterday.

Mr Tam cited the example of Canada, which had taken five years to complete a study on its goods-and-services tax.

'As a direct tax which hits both the rich and the poor to the same extent on their purchases, it will likely arouse resentment from less well-off consumers,' he said.

Delivering a preview of the Budget for the financial year starting on April 1, Mr Tam reiterated the firm's forecast of a $50 billion budget deficit for the year to March 31.

He said the figure was based on estimates of a $30 billion fall in land-sales revenue, an $8 billion decline in stamp-duty income and an $18 billion drop in profit tax compared with the previous financial year.

He expected the resumption of land sales in April to bring in estimated income of $10 billion to $15 billion in the next financial year.

Mr Tam said the Government might not need to raise taxes if the economy recovered next year, as was expected by the accounting firm, during which a balanced budget was forecast.

If the economy did not recover as expected, he estimated that a 1 to 2 per cent income or profit tax might be imposed in two to three years time to rein in the budget deficit.