A nine-month consultation exercise was launched in Hong Kong Tuesday inviting views on a proposal to introduce a goods and services tax to broaden Hong Kong's tax base, which has touched off a heated debate.

Speaking to the press Tuesday morning, Hong Kong Financial Secretary Henry Tang said although the subject is controversial, the Hong Kong Special Administrative Region (HKSAR) government will not evade the issue because it has a great impact on Hong Kong's future stability and prosperity.

Noting Hong Kong's tax base is narrow, he said the introduction of a low, single-rate goods and services tax (GST) is a viable option for Hong Kong.

"This would secure the long-term sustainability of our revenue base and our capacity to meet public expenditure needs," Tang said.

Tang emphasized the HKSAR government has no intention of altering Hong Kong's envied position as a low-tax environment.

"As our present economic circumstances and those in the foreseeable future are positive, we have an opportunity through this consultation process to think clearly about this important issue," Tang said.

Assuming a 5-percent GST rate is levied, it would be capable of generating 30 billion Hong Kong dollars (US$3.87 billion) in gross revenue.

The HKSAR government proposes that, for the first five years after the GST's introduction, all revenue it has generated after deducting administrative costs would be returned to the community as tax relief and other compensation measures.

It also proposes that all key elements of the tax reform, once finalized and introduced, would remain unchanged for the first five years.

Page:

1

2