Debate on "Revenue Bill 2006" (24 May 2006)

MR JAMES TIEN (in Cantonese): Madam President, I know very well that this Agenda item is on the resumption of Second Reading debate for the Revenue Bill 2006 (the Bill). I shall focus on the issue of salaries tax relief relating to the Bill. Mr SIN Chung-kai raised many points and I do agree with him. I shall deal with these points in detail in the relevant motion debate this evening.

Madam President, let me now discuss the issue of salaries tax relief. In 2002-03, the Government started to increase the tax burden of the middle classes, and a special attempt was made to introduce the tax increase in two separate stages. We are not asking for any refund. What we are saying is that if the Government has any fiscal surpluses, it should reduce taxes. Regarding the tax increase imposed in two stages starting from 2002-03, the revenue increase in each stage amounted to some $3 billion. In other words, the revenue of the Government increased totally by some $6 billion. We have been advising the Government all this year that if there are enough surpluses, it should offer tax relief to the middle classes. However, in February, the Government said that people were wrong and the surplus was just $4.1 billion. At the beginning, the Government told us that there would be a deficit of $10.6 billion, but later on, it said something different, claiming that there would be a surplus of $4.1 billion instead. But many experts and the business sector all think that the surplus should not be as small as $4.1 billion.

In this connection, I must point out that in the past few consecutive years, the figures announced when the formulation of the Budget began all subsequently turned out to be smaller than the revised figures for the years concerned ─ Mr SIN Chung-kai also mentioned this point. Perhaps, I should cite all these figures once again. Earlier this year, the Government announced that at the end of March, there would be a surplus of just $4.1 billion. But it turned out that the surplus was $9.9 billion in excess, amounting to $14 billion. Similarly, it was announced in February last year that the surplus would be $12 billion, but the surplus subsequently turned out be $21.4 billion, that is, $9.4 billion more. The year before last (2003-04) was a very bad year, and the Government said that the deficit would be $49 billion. But in the end, the deficit was just $40 billion, that is, $8.9 billion smaller. We can see that in each of the past three years, there was invariably a discrepancy of some $9 billion. Madam President, I think ……

PRESIDENT (in Cantonese): Mr James TIEN, I am sorry, but I must interrupt you. It will be unfair if I do not do so because Mr SIN Chung-kai talked about these points and you are also talking about them. Please speak to the motion question.

MR JAMES TIEN (in Cantonese): Yes. Madam President, I talked about surpluses because the surplus this year is $9.9 billion more than what was originally announced. The Government may understandably argue that one should not ascribe this extra $9.9 billion only to salaries tax. I must point out that since the economy of Hong Kong has been improving throughout this year, there are three sources of rising revenue for the Treasury. Its tax revenue is as high as $145 billion. Well, let me just put this aside for the time being.

However, Madam President, I must still talk about something that is absolutely related to the part of the Bill on salaries tax. The salaries tax revenue this year is as high as $37.5 billion, showing an increase of 10%, or $3.7 billion, over the figure for last year. This means that the Government has received an extra $3 billion or so from salaries tax. Consequently, it should be able to return at least some $3 billion to the middle classes. I am not going to talk about all the details of the tax relief measures proposed in the Bill, but generally, the relief offered to the middle classes will just amount to roughly $1.5 billion. We have been requesting the Government to restore salaries tax to the levels in 2002-03 (involving as much as $6.8 billion), and just last year alone, there was already an increase of 10% (or $3.7 billion) in salaries tax revenue. In view of all this, we think that the Government should offer still a greater tax relief.

Madam President, we do not think that any political parties or groupings can possibly reject the Bill because if they do so, the middle classes will even fail to enjoy this tax relief of roughly $1 billion. We will therefore support the Bill. But this does not mean that the Government should "cry wolf" every year when preparing the Budget, claiming that it is unable to offer relief to the middle classes despite a surplus of $9 billion. We also note that the only thing we can do this year is to discuss this issue again with the Financial Secretary at the end of the year. If passed, the Bill will become law, and they will do nothing more. Therefore, during the motion debate later on, we will put forward these proposals to the Government. With these remarks, Madam President, I support the Second Reading of the Revenue Bill 2006. Thank you.