Financial Secretary of Hong Kong Special Administrative Region (HKSAR) Henry Tang said here Wednesday that the government proposed the current tax cuts in the 2006-2007 budget according to its capability, denying the budget was "too conservative."

In the HKSAR government's 2006-2007 budget presented to the Legislative Council, Henry Tang proposed a tax reduction package of 2.7 billion Hong Kong dollars (348 million U.S. dollars) for citizens.

Tang said the proposal on cutting salary taxes alone will benefit nearly 1 million people, or three quarters of taxpayers, and cost the HKSAR government about 1.5 billion Hong Kong dollars (about 194 million U.S. dollars) a year.

In response to a question that whether the budget's tax reduction plan has disappointed both the middle class and the low-income groups, Tang said all the tax reduction measures were proposed in accordance with the principle of "weighing our actual capability and sharing wealth."

"I know some of them will be disappointed but my prime responsibility as financial secretary is to strive for balance between revenue and expenditure," Tang said, "thus I need to manage financial issues prudently."

Tang said he was mindful about how hard Hong Kong had been recovering from the previous fiscal years, which had left a large deficit record of more than 160 billion Hong Kong dollars (about 21 billion U.S. dollars).

"The situation is not as rosy as you may think," he said, adding that the current 4.1 billion Hong Kong dollars (529 million U.S. dollars) surplus in the government's Consolidated Account was not very big compared to the large deficits in preceding years.

"Actually, our fiscal structure is still very frail," Tang said.

But Tang said the HKSAR government will continue to increase investment on education, social welfare and health while extending greater assistance to those disadvantaged groups in the future.

Source: Xinhua