Hong Kong plans to introduce Goods and Services Tax (GST) to stabilize government revenue, Hong Kong's Financial Secretary Henry Tang said on Wednesday while presenting the government's 2006-07 budget to the Legislative Council.

Tang said that land premiums and investment income are very important, yet volatile, revenue items. As a share of government revenue over the past 10 years, the former has fluctuated between 3- 28 percent, and the latter between 0.5-18 percent.

"The existing structure of government revenue is less than healthy. We need revenue items which are less sensitive to the ups and downs of economic cycles to offset the volatility of the others," Tang said.

As widespread experience overseas has demonstrated that a GST can achieve this purpose, Tang said he believed it is the civic responsibility of the Hong Kong people to contribute an affordable amount of tax.

In working out the details of GST, the government will follow the principle of maintaining low and simple tax regime and consult the public on the detailed proposals, he said.

"We intend, inter alia, to provide tax refunds to visitors and allow importers to defer payment so as to relieve pressures on their cash flow. To reduce the erosion of people's purchasing power, we will also propose relief and compensatory measures,"

Tang said.

As regards timing, the public consultation will be launched in the middle of this year and will last about nine months in order to allow sufficient time for the public to express their considered views. From making a decision to introduce GST to its actual implementation will take about three years, Tang said.

Source: Xinhua