No tax rises or reductions announced in budget

Updated at 6.11pm: No new taxes - or tax increases - would be introduced in this year's budget, Financial Secretary Henry Ting Ying-yen announced on Wednesday.

But Mr Tang said said there would also be no tax reductions.

'In this year's budget, I propose no further increases in salaries tax, profits tax or any other taxes. This respite will allow the Hong Kong community and our enterprises to re-gather their energy. It will also create conditions favourable for a sustained economic recovery,'' said Mr Tang.

'However, owing to our tight fiscal position at present, there is really no room for major tax reductions,' he added.

The Financial Secretary said he had decided to maintain rate charges at five per cent. 'Since rateable values fell by an average of eight per cent last year, the amount of rates payable for the vast majority of premises in the coming year will be lower.

'Not counting the affect of the rates concessions for the third quarter of last year, we expect that over 90 per cent of ratepayers will see an average reduction of 11 per cent in their rates bill next year,'' he said.

To fund infrastructure or other investment projects, government bonds would be issued. These would increase flexibility in the government's asset sales and securitisation programme.

'The issuance of government bonds will also help promote the development of our bond market. At present, deposits in local banks exceed $3,600 billion,'' Mr Tang said.

'The returns on these deposits are very low because of the current low bank interest rates. Quality bonds are an investment option that can provide a steady and higher return. The issuance of government bonds could offer retail and institutional investors such an option,' he explained.

The Financial Secretary also proposed that the government would not issue bonds exceeding $20 billion in 2004-05. 'We will decide whether to issue additional bonds in future in the light of market conditions, the amount of funds required for our investment projects and the implementation of our asset sale and securitisation programme,' he said.

He said the government was not issuing bonds to cover its operating expenditures.

'On the contrary, our principle is that operating expenditure should be covered by operating revenue. We will definitely not live on credit. We will continue to maintain strict fiscal discipline and control of expenditure with a view to restoring fiscal balance,' Mr Tang said.

He said the government would also continue with asset sales and securitisation plans. 'The government is now consulting concerned parties on the overall arrangements for the privatisation of the Airport Authority. We hope that an initial consensus will be reached as soon as possible so that the legislative process can commence.

'We will shortly introduce into this Council an amendment bill to effect capital restructuring of the Airport Authority in the meantime. We have also set a tentative timetable for the rail merger. We plan to conclude discussions with the two railway corporations within six months. If the required legislative processes can be completed next year, we hope to implement the airport privatisation and the rail merger in 2005-06.'

Mr Tang also announced the following measures:

• The salaries tax deduction for home loan interest will be extended;

• The duty concession for 'ultra low sulphur diesel' will be extended;

• A Personalised Vehicle Registration Marks Scheme will be introduced. 'It will substantially relax the restrictions on vehicle registration marks for participating vehicle owners, to allow for any combination of up to eight letters and numerals,' explained Mr Tang;

• The government will examine revising some of its fees and charges;

• It will also look at the future need to introduce a 'green tax' to stop pollution;

• It would investigate adjusting the level of estate duty in Hong Kong.

Mr Tang said Hong Kong still needs to improve corporate governance 'To keep pace with market development, we will continue to improve our regulatory framework. One of our major tasks is to enhance our corporate governance to keep it in line with international standards.'