On track: Financial Secretary Henry Tang says Hong Kong is on track to achieve a surplus of $5.6 billion as estimated in the 2006-07 Budget.

This fiscal year's revenue may reach its target, Financial Secretary Henry Tang says, adding that discussions with the public will continue to explore options to widen the tax base.

He told a radio show today that Hong Kong's economy is thriving, with higher-than-expected growth registered in the third quarter. Consumer price inflation is still mild and total employment has also reached an all-time high.

At the end of October, the deficit was lowered to $21.9 billion and fiscal reserves stood at $288.7 billion. Government spending amounted to $132.8 billion and revenue $110.9 billion. Given the outturn so far, Mr Tang expressed confidence that Hong Kong is on track to achieve a surplus of $5.6 billion as estimated in the 2006-07 Budget.

Prudent management

He said Government spending remains stable, with education, security, welfare, medical and hygiene services accounted for 60% of the total spending.

While he is aware of people's aspiration for a tax cut, he said Hong Kong's economy is easily affected by global factors due to its highly open and externally oriented nature and caution must be exercised in fiscal management even if a surplus is achieved.

When asked if the salary tax level can be revert to the 2002-03 level, Mr Tang said this suggestion requires more detailed study as the salary tax system is a complex one involving four key elements.

Discussions continue

On tax reform, he said people are of the view that there is a pressing need to explore ways to widen the tax base in view of the aging population and globalisation. However, they do not think the proposed sales tax is the best option.

Mr Tang said the Government will continue discussions with the public on the issue. While other options, such as progressive and capital gains taxes, will also be explored, he stressed any tax reform proposal should adhere to the principle of affordability and avoid double taxation. It should also not affect Hong Kong's competitive edge and market operation, he added.