October 23, 1998
Democratic Party Puts Forward 10 Point Budget Proposal in First Political
Party Meeting with Government on 1999-2000 Budget
The Democratic Party met today with Financial Secretary Donald Tsang
to offer the party's budget proposals. The DP is the first party to meet
with the Financial Secretary regarding the government's submission of the
1999/2000 budget to the Legislative Council. The DP put forward 10 specific
proposals including a call for a slight deficit budget, tax relief for
the middle class and small and medium business enterprises, a resumption
in government land sales, tax incentives and a freeze on government rates
The Ten Point Proposal follows.
CONTACT: Sin Chung-kai, DP Economic Spokesman Tel. 2509-3211, Pager
Democratic Party 10-Point Budget Proposal
1. Set Up a Reasonable Deficit Budget to Respond to Hong Kong's Economic
- The DP calls for a reasonable deficit budget in 1998-2000 to restore
the economy to health. In 2000-2001, the government should respond to the
economic situation and the needs of the Hong Kong people while still being
Table 1. Comparison of HK SAR Government and DP Estimated Budget
| Unit: 1 million
|| Govt. est.
|| DP est.
|| Govt. est.
|| DP est.(1)|
(1) assuming the Government resumes land sales as scheduled, the Government
income from land sales is estimated to drop by 50% due to the poor performance
of the property market.
(2) original estimation
(3) Government's estimate in June 98
(4) the figure for Income and Expenditure is used to calculate the estimated
2. Resume Land Sales to Stabilize the Income of the Government
- Revenue from land sales is one of the major sources of the government
income, constituting 20% of government revenue in 1997/1998. The Government
should resume land sales in the first quarter of 1999 and set up a reserve
price to restore stability to government income. Resumption of land sales
will provide the government with an estimated $20 billion.
3. Refund 20% of Salary Tax & 20% of Profit Tax to Medium to
and Small-sized Enterprises
- The Government's budget surplus in FY 1997/1998 was $80.9 billion,
$49.2 more than the Government's estimate of $31.7 billion. DP urges a
refund of 20% of the salary tax in 1997/1998, and 20% refund of profit
tax to small and medium sized enterprises (SMEs) whose profits are not
more than $1.5 million. The estimated amount of these refunds is $10.8
billion, including $6 billion for the salary tax and $4.8 billion for profit
4. Freeze Rates for the First Quarter to Lower the Burden on Owners
- Keep rates at 4.5% in 1999/2000 but rebate the rates collection raised
in the 1st quarter. The average rates would then be 3.375% and the estimated
loss to the Government would be $2.6 billion.
5. Freeze all Government Fees and Transportation Fares
- Freeze all Government fees for another year, including all charges
for the commercially-oriented services provided by trading funds. Urge
transportation authorities wholly owned by the Government (MTR, KCRC, LTR)
to cut fares in 1999.
6. Tax Incentives for Technology Development and Redevelopment of
- Allow double-deduction for expenses on R&D to lower the profit
- Increase the initial depreciation rate of commercial buildings to
20% to encourage redevelopment of old commercial buildings.
7. Tax Incentives for Worker Retraining
- Introduce tax allowance for companies which provide training to their
workers, allowing double the training expenses to be deducted to encourage
- Increase the personal deductible training expenses from $30,000 to
8. Tax Incentives for Energy Conservation and Protection of the
- Give 100% tax deduction for energy conservation and environmental
9. Combine Tax Brackets to Reduce the Burden on the Middle Class
- Combine the second and third tax brackets. In 1999/2000, the 1st and
2nd tax bands should be extended to $48,000. Example: If the taxable income
is $105,000, one has to pay $6,330 tax instead of $7,350, a reduction of
10. Help the Disadvantaged
- Introduce tax allowance for employers who employ retraining graduates
and disabled persons, allowing the wages paid to these employees in the
first 6 months to be made tax deductible at the rate of 250%.
- Set up extra allowances for the disabled, up to one half the basic
tax allowance of a single person