A Nobel economics laureate said yesterday Hong Kong could raise its salaries tax rate and increase the number of taxpayers, because the SAR's tax level was low when compared to other regions. But senior officials said the time might not be right for tax increases because they could have an adverse effect on the economy and people's livelihood during the economic downturn. Speaking after a seminar on tax systems, Sir James Mirrlees, a Cambridge economics professor awarded the Nobel prize for economics in 1996, said the introduction of a sales tax could also be an option for the cash-strapped Treasury. Stressing that both options could achieve an increase in revenue to cover the worsening budget deficit, Sir James said he would prefer raising the salaries tax rate than introducing a consumption tax. 'I would much prefer to see the marginal tax rate raised on higher incomes . . . more people could be taxed,' he said. Sir James said the standard income tax rate - at present 15 per cent - was very low when compared to countries such as Britain and Singapore. He said while a British model of 40 per cent would be too high, Hong Kong could follow the Singaporean model of 'at least 20 per cent'. 'As far as I can see, the amount by which you need to raise the tax rate is not so very great if you are going to eliminate the deficit in three years,' Sir James said. 'You have the reasonable expectation that income from land sales will increase again.' Sir James said the introduction of a sales tax would involve high administration costs, and added that any tax system should reduce the welfare of the consumer as little as possible. Faced with a $56 billion deficit, the government this year toyed with the idea of introducing a sales tax to broaden the tax base. A land departure tax was also proposed on top of studies to legalise soccer gambling. Professor Lau Siu-kai, head of the Central Policy Unit, which organised the seminar with Chinese University, said although the public had shown increasing support to government cost-cutting, no other drastic measures should be carried out at present. 'Since the future is still not clear, any plans to increase tax should have wide consensus because it could make things even worse,' he said. Joseph Fu Chi-kwong, president of the Taxation Institute of Hong Kong, said although there was room for change in the tax system, the government should first try to address the deficit by more radical cost-cutting. He said also the government could issue public bonds to fill budget shortfalls.