Hong Kong Financial Secretary Antony Leung introduced higher taxes aimed at curbing the territory's rising budget deficit. The increases come in stark contrast to the budgets in recent years, when the government cut some fees and taxes.
Hong Kong's government plans to eliminate its $9 billion fiscal deficit in four years. To do so, Financial Secretary Antony Leung said Wednesday, it will increase revenue by $4 billion over the next three years, and cut spending by a similar amount.
In his annual budget speech, Mr. Leung introduced higher taxes and revoked tax concessions granted in 1998 and 1999.
The salary tax will go from 15 percent to 16 percent, while the corporate tax will increase from 16 percent to 17.5 percent. Car taxes and the airport departure fee also will rise. The government expects that the introduction of legal soccer betting will raise revenue through gambling levies.
Mr. Leung says economic growth also will help trim the deficit. He says gross domestic product grew by 2.3 percent last year, up from 0.6 percent a year earlier.
This year, he predicts the economy will grow by at least three percent. This, Mr. Leung says, will increase government revenue by almost four billion dollars.
He warns, however, that economic growth alone will not solve the deficit, and a sales tax might be introduced in the future. Government also hopes to raise funds by selling off assets worth about $14 billion over the next five years.
Joseph Fu of the Hong Kong Taxation Institute, a think tank that advises the government, says the higher taxes will not seriously hurt people's livelihoods. However, he is disappointed that more was not done to encourage the growth of small businesses.
"Generally I am positive about it," said Mr. Fu. "Although I would like to see more said about helping entrepreneurs and helping the private sector to invest more."
The Hong Kong government ran into budget problems in the late 1990s, after the property and stock markets both entered long slumps. The government relies heavily on revenue on taxes from stock and real estate sales. The city's economy has been weak for nearly three years.
Some analysts in Hong Kong have raised fears that the measures announced on Wednesday may not be enough to eliminate the deficit. Some say the predicted economic growth of three percent for this year may be too optimistic. Others say the price of the government assets to be sold may shrink if market conditions are weak.