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Hong Kong Slashes Taxes as Surplus Hits Record High

Hong Kong has cut taxes after posting a record budget surplus and Malaysia Airlines is back in the black, posting a record profit for 2007. Claudia Blume in Hong Kong has more on these and other business stories from Asia.

Hong Kong's government says it will give back to the community a large chunk of the territory's record budget surplus of almost $15 billion for this financial year.

Income tax will be cut by one percent to 15 percent, and corporate profits tax will be reduced by the same amount, to 16.5 percent. Financial secretary John Tsang has also announced a one-time salaries tax rebate of up to $3,200.

"I now propose a one-off tax reduction of 75 percent of salaries tax and tax under personal assessment for 2007-08, subject to a ceiling of 25,000 Hong Kong dollars ($3,200)," he said. "The reduction will be reflected in the taxpayer's final tax payable for 2007-08. This proposal will cost the Government 12.4 billion Hong Kong dollars ($1.6 billion) in 2008-09 and benefit 1.4 million taxpayers. After the reduction, about a million taxpayers will pay no more than 5,000 Hong Kong dollars (643) in tax.

Malaysia Airlines says its net profit in the fourth quarter of 2007 doubled compared to a year earlier, thanks to strong passenger demand and improved yields. Profit for the three months until December was $75 million, pushing up the airline's full year earnings to $264 million.

The record earnings indicate that Malaysia Airline's sweeping transformation plan, implemented after it suffered two years of losses, has showed results. The state-owned airline cut staff and routes and sold non-core assets to try to become more profitable.

Mongolia says it plans to build a $200 million road network linking its western region with China and Russia. The project will cover nearly 750 kilometers and become part of the Asian highway network, a 140-thousand-kilometer road system through 32 Asian countries. Construction is partly financed by the Asian Development Bank and is scheduled to begin in the second quarter of 2009.

A South Korean consortium has signed a deal with Uzbekistan's state gas company to develop a major gas field in the central Asian country. The venture will be equally owned by the South Korean group, led by state-run Korea Gas, and Uzbekistan's Uzbekneftegaz. The gas field in Surgil in western Uzbekistan is estimated to hold about 96 million tons of liquefied natural gas.