The government should raise taxes slightly to ease the budget deficit and introduce business tax deductions to spur investment, an accounting society said yesterday. The proposal from CPA Australia's Hong Kong branch follows recommendations from other accounting groups and investment banks on how the government can raise more money or cut spending to rein in the deficit, which rose to a record $72.4 billion for the first seven months of the financial year. CPA Australia proposed increasing the corporate profit tax rate to 16.5 per cent from 16 per cent and raising the salaries tax to 16 per cent from 15 per cent. This would raise $3.5 billion, while $2 billion could be gained by lowering the $108,000 personal tax-free allowance by 10 per cent, it said. Sarah McGrath, deputy president of the branch office, said the proposals were 'easy and affordable' for the government to implement and would not be a burden on taxpayers. 'This is a responsibility that the whole community needs to take up. We consider that this [1 percentage point tax increase] will be moderate,' she said. Marcellus Wong, CPA Australia's vice-president of intellectual capital in Hong Kong, noted that the tax-free allowance in the SAR was already the highest in the world. He said the slight tax increase 'is certainly better than introducing a sales tax'. Swiss investment bank UBS Warburg and accounting firm Deloitte Touche Tohmatsu have made similar proposals. CPA Australia also called on the government to give companies a 150 per cent tax deduction for expenses on staff training or scientific research and development. It also proposed full tax deduction for money spent by businesses on acquiring intellectual property rights or environmentally friendly measures. It said start-up businesses in logistics and environmental services should be exempt from profit taxes for three years. 'These incentives will help offset the high cost of doing business in Hong Kong, and this in turn will give higher returns on investment,' Ms McGrath said.