Replenishing coffers: Financial Secretary Henry Tang says tax reform is necessary as the existing system relies too much on non-recurrent revenue.

Tax reform is necessary as the existing system relies too much on non-recurrent revenue, Financial Secretary Henry Tang says, adding that the study on the introduction of a goods and services tax aims to arouse a discussion on the issue.

Speaking on a radio talk show this morning, Mr Tang said the introduction of a GST is a controversial issue and objection is expected.

However, the Government cannot be evasive about the topic and should lead the public to look into the problem and understand the need to widen the tax base.

Mr Tang said a GST would not be introduced until 2009 at the earliest even if the community reached a consensus in the public consultation.

He expected the consultation to take a year and the legislation and preparations would take at least another three years.

If a GST is implemented, the Government will also introduce measures to ease the financial burden on low-income families, Mr Tang stressed.

On Hong Kong's economic development, Mr Tang said the recent economic recovery is better than expected and he is optimistic about meeting the target to achieve fiscal balance by 2008-09.