Revenue generator: Financial Secretary Henry Tang argues now is a good time to launch a goods and services tax as Hong Kong's economy is recovering, with inflation under control and falling unemployment.

The Government plans to submit a consultation paper on a proposed goods and services tax to lawmakers next week and then launch a nine-month public consultation on this issue, Financial Secretary Henry Tang says.

Speaking on RTHK's morning talk show, Dialogues with Secretaries, Mr Tang said he will complete the consultation work on the proposed tax reform and pass it on to the administration to decide whether to implement it or not.

Noting Hong Kong's limited tax base is a persistent problem, he said now is a good time to launch a comprehensive and in-depth discussion of a goods and services tax. The city is enjoying solid economic growth, falling unemployment and relatively tame inflation.

As the economy moves in a cyclical pattern, Hong Kong should grab this opportunity to think about introducing a new tax to enlarge the source of government revenue and stabilise public finances.

Mr Tang said the consultation paper will propose exemptions to reduce the effect of any new tax and provide tax relief for taxpayers, and some relief measures for the low-income group people.

Foreign countries used as reference

When devising a goods and services tax, he said the Government will look at overseas' tax regimes, adding that similar taxes have been in place for years in developed countries such as Singapore, Australia, Sweden and many European countries.

Mr Tang stressed the goods and services tax is efficient as it is less vulnerable to economic downturns than the salaries tax, and Hong Kong needs a stable tax source to better plan for future education, welfare, medical and infrastructure spending.

As the city's population is ageing, the number of workers and working taxpayers may decline in future, threatening the source of government revenue. The introduction of the goods and services tax would offer greater financial security.