There is no evidence of a structural deficit problem in Hong Kong, with the possibility of a small budget surplus for last year despite warnings of a blow-out, according to accountancy firm Grant Thornton. Tax partner Paul Chow said yesterday although the SAR Government expects a deficit of about HK$11 billion, Grant Thornton predicts a more positive result. Meanwhile, KPMG has estimated a HK$13 billion budget deficit to be announced by outgoing Financial Secretary Donald Tsang Yam-kuen on March 7. However, Grant Thornton has estimated if there is a deficit, it could be about HK$7 billion. The firm also believes last year's Budget may still end in surplus, as it did the year before. 'We have formed the view of a possible surplus because it is clear the Government has a very conservative approach. Normally revenue would be under-budgeted and expenditure over-budgeted,' Mr Chow said. For example, in 1999/2000, estimated expenditure was HK$241.62 billion. Actual was HK$223.04 billion, resulting in a 7.7 per cent variance. After an analysis of the past three year's percentage variances, Grant Thornton has found that the Government's expenditure is not HK$250.440 billion, but 5 per cent less at HK$237.918 billion. This results in a budget deficit of HK$7.72 billion under estimated revenue of HK$230.195 billion. Mr Chow said government expenditure for April to December was HK$162.7 billion and revenue HK$132.5 billion. As about 80 per cent of salaries tax and most profits tax will be collected from January to March, he believes the deficit for 2000/2001 has already bottomed out. 'If the expenditure is less than our projections and with the improving economy having good potential for bringing in more tax revenue, it is even possible that the Government might have a small surplus,' Mr Chow said. 'It could be between HK$1 billion and HK$3 billion.' Many tax specialists have voiced concern about the possibility of a structural as opposed to cyclical deficit problem. Land has provided the Government with most of its revenue but stagnant property prices since the economic crisis have brought into question this revenue base. The Government has set up a committee to look into the possibility of introducing a broader system, including a sales tax. Still, the committee is not expected to report until November and according to KPMG partner David Smith, even if a new structure is announced in 2002, it will not be ready until 2004. Mr Chow said if the economy continues to improve, the tax recouped from increased business activities and workers' earnings would rise significantly. Still, Mr Smith believes there is a structural issue in Hong Kong. 'At the moment, too much comes from [mainly property] and relying on one sector can be dangerous,' Mr Smith said.