The economic good times are rolling again. The news gets better and better as the rebound continues. It is becoming easy to forget the dark days of the downturn. Deflation has gone, the budget deficit is going and the property market is buoyant again. Yesterday, credit rating agency Standard & Poor's reacted to these developments by upgrading Hong Kong's foreign currency rating from stable to positive. The move came a day after record salaries and profits tax receipts were revealed by the Inland Revenue Department. More than $96 billion was collected in the last financial year, a 20 per cent increase on 2003-04. A higher rate of profits tax played a part, but the surge was due mainly to increased economic activity. The property market was a big source of the extra income - the receipts from stamp duty increased more than 40 per cent. Stock market transactions contributed almost $6.4 billion. Total tax revenue came in at more than $127 billion. These strong figures confirm an outcome Standard & Poor's described as a boost both to the government's revenues and its fiscal prospects. But the agency's report also carried a note of caution. It is one which should focus minds as we look ahead. The report noted that much of the improvement in Hong Kong's fiscal position can be attributed to 'cyclical factors' such as rising land sales and increasing economic growth. What goes up can, of course, also go down. This is why we should not be too quick to forget the economic downturn. If the property market takes a turn for the worse or the days of deflation return, the government will be back to square one. The budget deficit would start to grow again. As Standard & Poor's points out, there is a need to put our city's finances on a firmer footing by establishing a more stable source of revenue. This means broadening Hong Kong's narrow tax base. Currently, only 300,000 income earners pay around 90 per cent of salaries tax revenue received by the government. Most wage-earners pay no tax at all. A goods and services tax (GST) is the preferred option. During the downturn it was easy for the government to justify moves to introduce this new tax. All officials had to do was to point to the spiralling deficit. They frequently did. This is understandable. But it is no longer possible. By the time a GST is introduced, we will probably not have a deficit any more. The real reason for bringing in the new tax is to tackle structural problems. Financial Secretary Henry Tang Ying-yen conceded this in November, when he said the GST was about reform, not eliminating the deficit. It would be tempting for the government to sit back and do nothing except watch the revenue roll in. But it must get on with the job of broadening the tax base - and that means a GST. A public consultation on the tax will not be launched until after the new chief executive is in place. Officials have spoken of the need to listen to the views of the public. But it will be more a question of selling the need for the tax and persuading the public that it is in Hong Kong's best interests. People do not generally accept new taxes easily. Other countries have found that the extra revenue which a GST brings allows other tax concessions to be made. This should be possible in Hong Kong. The government has made it clear that the GST will be revenue neutral. Such a step could prove invaluable in convincing the public that the new tax should be accepted. The introduction of a GST should also lead to a big reduction in the government's reliance on land sales - and all the volatility such a dependency involves. Hong Kong requires an efficient, modern and equitable tax system which ensures a steady flow of revenue. We cannot rely on the economic news always being so good.