Government spending for the year ended March 31 amounted to $233.1 billion while revenue was $247.1 billion, resulting in a surplus of $14 billion. That is $9.9 billion more than the $4.1 billion surplus forecast in the 2006-07 budget.

Financial Secretary Henry Tang said the market turned active in this year's first quarter, leading to an unexpected yet significant surge in government revenue.

He stressed the Government had no intention to underestimate the figure in the 2006-07 budget announced in February, adding the books have been scrutinised with objectivity and professionalism.

Mr Tang said the 2007-08 budget will be formulated after detailed consultation, adding it is too early to say whether there will be any tax cuts or rebates now. However, the Government will see if any such concessions can be offered to the public after assessing its financial situation and outlook.

Tax revenue increases

The improved financial position was mainly due to higher collections of stamp duties, salaries tax, profits tax and land premiums towards the end of the financial year. These increases in revenue totalled $5.4 billion.

Departments' strenuous efforts to rein in spending and spend only where necessary also resulted in a savings of $4.5 billion.

The difference in spending between the revised estimate and the provisional results this year was actually smaller than those in the previous two years. In 2005-06, the variance was $4.5 billion while the figures for 2004-05 and 2003-04 were $7.5 billion and $5.4 billion. This reflects continuous efforts of bureaux and departments to improve their financial management.

Of the $4.5 billion variance in spending in 2005-06, only $2.2 billion was due to underspending in operations, which was just about 1% of the total operating expenditure for the year. 

Fiscal reserves up $14.7b over a year ago

The fiscal reserves stood at $310.7 billion at March 31, up $14.7 billion over the same time last year. The surge comprised the surplus of $14 billion for the year ended March 31 and $700 billion for write-back of provision for loss in investments with the Exchange Fund made in 2004-05.

The figures are provisional pending the final closing of the annual accounts. But experience shows any changes to the provisional figures are unlikely to be significant.