Controversial revenue option a non-starter while economy is so weak, vows Chief Executive

Chief Executive Tung Chee-hwa yesterday vowed not to introduce a sales tax while the economy was suffering.

Speaking just seven weeks before Financial Secretary Antony Leung Kam-chung's first Budget and a day after the unemployment rate hit a two-year high of 6.1 per cent, Mr Tung took the unusual step of ordering senior aides to create more new jobs.

At a media briefing in his election office in St John's Building, Central, he also revealed that he would formulate a comprehensive population policy as a top priority if he was re-elected to serve a second term.

On the economy, he said: 'Our problem of budget deficits is very serious. It may take three, four or five years for a return to a balance. We have to do it. We can do it. The Government must enhance efficiency and streamline its structure. At a time when the economy is still weak, the introduction of broad-based taxes, such as a sales tax, is a non-starter. We can't do so.

'Japan imposed a three per cent sales tax in 1997 when its economy began to recover. Its economy went down immediately. It's a very good lesson. We have to be very careful.'

Mr Leung confirmed on Thursday that a government study had found budget deficits to be 'structural', implying that spending would still exceed revenue even when the economy had improved.