Pressure to introduce new taxes has increased after a government taskforce investigating budgetary problems yesterday said savings or additional revenue worth $35 billion a year were needed to balance the budget.
Defending her report on the problem of persistent budget deficits, Secretary for Treasury Denise Yue Chung-yee said revenue from land premiums and stamp duties had dropped sharply in the property market slump.
Shrinking investment returns from the reserves and a likely drop in profit tax due to businesses moving to the mainland would also reduce Government income.
The problem is aggravated further by an ageing population, that will increase welfare and medical spending over the next two decades, the report says.
High civil service salaries, which account for nearly 70 per cent of government spending, have outstripped wages in the private sector, which has been tightening its belt in the downturn.
Assuming the economy grows by five per cent and taxes and spending remain unchanged, the taskforce estimates savings or additional revenue of annual $35 billion will be needed if the budget is to balance by 2006-07.
