How much tax we should pay, and how that should vary according to economic circumstances, are debatable points. But it is interesting that there have been calls on Financial Secretary Henry Tang Ying-yen to reduce the salaries tax to 2002-2003 levels. It is not clear how its proponents justify the proposal, except that tax rates then were the lowest in a decade. However, those rates were set during boom times, and Hong Kong is far from experiencing a boom - even though the economy is well on the road to recovery. Back in 1996-1997, when the city was basking in sumptuous affluence, the tax burden was higher. Anyone earning more than HK$90,000 had to pay tax. The marginal tax band was HK$30,000, the marginal tax rates were 2, 9, 17 and 20 per cent respectively, and the standard tax rate was 15 per cent. As the government had more money than it could spend, then financial secretary Donald Tsang Yam-kuen - now chief executive - decided to slash taxes. Over three years, the basic personal tax allowance was raised to $108,000 and the marginal tax band widened to $35,000; the marginal tax rates were cut to 2, 7, 12 and 17 per cent respectively. As Mr Tsang noted in his 1999-2000 budget, he had 'increased basic allowances by a cumulative 36.7 per cent compared to inflation over the same period of 15.7 per cent'. He had also 'reduced the marginal tax rates substantially and widened the marginal tax bands'. But the wisdom of those reductions was not unanimously appreciated: many people fell out of the tax net when the basic allowance was reduced. Some critics felt that taxes should not have been cut so heavily, so that rising revenue would be available to meet the demand for better services. The counter-argument - which the government tacitly adopted - was that it would not be prudent to introduce new services requiring constant recurrent funding, as tax receipts could drop in an economic decline. Hence, the decision to reduce taxes during a boom. In his 2001-2002 budget, as economic woes reduced public revenue, Mr Tsang said he had thought about raising the salaries tax rate and reducing allowances to cut the government's operating deficits. But he decided against doing so, as that would have hit the middle class when they were already down. The tough decision to raise taxes fell on Antony Leung Kam-chung, who succeeded Mr Tsang in 2002. In his 2003-2004 budget, Mr Leung announced measures to restore, over two years, the levels of the basic allowance, tax band and marginal rates to 1997-1998 levels. They were still a notch lower than those of 1996-1997. The standard tax rate was also raised to 16 per cent. Some of Mr Leung's measures have been rolled back by Mr Tang over the past two years, as the economy recovered. Now the basic tax allowance is HK$100,000, the marginal tax band is HK$30,000, the marginal tax rates are 2, 7, 13 and 19 per cent respectively, and the standard tax rate is 16 per cent. Yet, compared with 10 years ago, the tax burden remains relatively low, except for those paying the standard rate. There has been no discussion on whether the 1996-1997, 1997-1998 or 2002-2003 levels should be used as the benchmark. Ideally, that should have been discussed in the consultation on a goods and services tax, but that wasn't done. The only sensible adjustment that Mr Tang should make now would be to follow the convention of reducing the standard tax rate to the historic norm of 15 per cent when the government is running a surplus. C.K. Lau is the Post's executive editor, policy.