Chief Executive Tung Chee-hwa said yesterday introducing a sales tax at present was out of the question, echoing comments made by Financial Secretary Antony Leung Kam-chung on Friday. But he appeared to suggest that creating new taxes was still an option to help tackle the budget deficit. Speaking to Hong Kong media in Los Cabos, Mexico, where he is attending a summit of the Asia Pacific Economic Co-operation forum, Mr Tung said he had every confidence the government would achieve its objective of eliminating the budget deficit by 2006-07. The government has come under renewed pressure this week to make progress in balancing its books after Standard & Poor's lowered its outlook on the city's currency rating to negative from stable. Mr Tung dismissed suggestions that the ratings move was a downgrading, claiming that the credit-rating body was just pointing out its long-term concerns. He said three ways to tackle the deficit would be to reduce expenditure, introduce new taxes in certain areas and keep the economy growing. 'In all these fronts, we are looking at examining every issue possible,' he said. Mr Tung ruled out introducing a sales tax as it could worsen deflation. He stressed that he attached much importance to Hong Kong's business environment and that his administration would take this into account when considering any new taxes. He said the government needed strong community support in tackling the deficit. He said the government could further reduce its manpower after downsizing 10 per cent in the past five years. But he stressed there were no plans for lay-offs. 'In fact, there is room within the government [to cut manpower]. Over the past five years, we have been working very hard to streamline the structure and have reduced manpower by 10 per cent. We will continue to work hard in this direction,' he said. But he did not say how the streamlining might be achieved. He said stimulating gross domestic product growth would help correct the deficit but he believed this would take some time to achieve. Tanrich Asset Management director Kennis Leung said most market players were not expecting a sales tax in the near future. 'A sales tax would have positive and negative effects, but under the current market situation it should not be introduced. We have a very fragile consumption market right now,' she said. Last week, Tim Lui Tim-leung, chairman of the Hong Kong Society of Accountants taxation working committee and a senior partner at PricewaterhouseCoopers, said the personal allowance deduction should be cut from HK$108,000 to draw in more taxpayers.