DON'T BET ON A BUDGET DEFICIT FOR 2000-2001
Good tax inflows in January help fiscal balance

Good tax revenue inflows in January make a nonsense of some of the more outlandish estimates of a big SAR Government deficit in the 2000-2001 fiscal year to March 31.

Figures out today show that the cumulative Budget deficit in the 10 months to the end of January this year narrowed to just $2.2 billion from more than $30 billion in the nine months to December.

In his Budget statement next week (7 March 2001), the outgoing Financial Secretary, Donald Tsang Yam-kuen, may still show something closer to a balanced Budget outcome for 2000-2001 (a small deficit or small surplus for the fiscal year).

However, by the time the final figures are out later in the year, there is likely to be a surplus for the new Financial Secretary, Mr Antony Leung Kam-chung, to report - a reversal of the original $6.2 billion deficit predicted for the 12 months.

While land premium income has suffered in the 2000-2001 fiscal year and is well below original estimates, the shortfall has obviously been made up in other areas, especially profits and salaries taxes and revenue from the MTR Corporation partial float.

The big surplus recorded in January this year of some $28 billion was a result of the pick-up in salaries and profits tax receipts and should have continued into February, the penultimate month of the fiscal year, and possibly into March.

In any case, the clear message in the numbers for the 10 months to January is that many of the estimates of a large Budget deficit for the year, from the Government and private sector analysts, have been overblown.

The current Financial Secretary's final Budget next week will clearly be watched with great interest, especially the Budget outcome for the 2000-2001 fiscal year and the predictions for the outcome in the 2001-2002 year.

In the absence of other Budget initiatives, the overall Budget outcomes are likely to be the focus of attention. This is because of the attention the Government has been giving to the need for alternative taxes to cover anticipated Budget deficits in the years ahead. If there are no deficits the need for new taxes may need to be re-assessed.

For further information, contact Ian K Perkin on 2823-1242.