The chief executive yesterday pledged to keep taxes low when tackling the budget deficit.
Tung Chee-hwa was asked at a post policy address luncheon with chambers of commerce if the government would consider broadening the tax net instead of making the burden on existing taxpayers even heavier.
He stopped short of giving any promises, but stressed the importance of a low-tax regime to Hong Kong's economic vitality. 'I believe very strongly in a low-tax regime because that's why Hong Kong has been successful. That's what we will try to do in the years ahead. If we move away from a low tax base we would be in real trouble,' he said.
The government hopes to balance the books by 2008-09 through spending cuts, tax increases and economic growth.
Mr Tung said the recent upturn in the economy had given Financial Secretary Henry Tang Ying-yen room to address the deficit issue without risking the economic recovery.
On the possibility of further pay cuts or layoffs in the civil service, Mr Tung said he appreciated the concerns of the business community. Referring to decisions to spread a pay cut of 6 per cent over two years and cut staffing by 10 per cent to 160,000 by 2006-07, he said: 'I know that in the business community you feel this amount is insufficient. But we felt that on balance it was the right thing to do.'
