"We are going to have a GST,"Marshall Byres, COO, Ernst & Young, declared at the Chamber's Business and the Budget Seminar on March 6.

"When I look at the numbers, Antony Leung is looking for another HK$6 billion towards 2006-2007," he said. "My thinking is that HK$6 billion would be the preliminary yield from a sales tax of about 3 per cent."

Mr Byres said he believes a Goods & Services Tax (GST) in Hong Kong is long overdue, and that it is now generally accepted that Hong Kong needs to widen its tax net. The Financial Secretary now also admits that the budget deficit is not cyclical, but structural, which is a result of over reliance on land revenue in the past, Mr Byres said.

Despite this, Mr Leung still seems to be keeping one eye closed to the fact that Hong Kong simply cannot afford to pay for its ballooning civil service.

"New York is about twice as big as Hong Kong. We have about 177,000 civil servants. New York, which admits it has far to many civil servants has 240,000," Mr Byres said. "So we should have about 100,000. So it is not just a question of a 3 per cent pay cut to reduce government expenditure, it is a question of headcount."

Rod Houng Lee, senior tax partner-head of Tax Services, PricewaterhouseCoopers, also speaking at the seminar, echoed Mr Byres point that the tax base still has not been widened enough.

About 2 million working adults in Hong Kong pay no salaries tax, compared to 1.3 million who do. Some 0.4 per cent of the working population (about 13,343 people) pay the standard tax rate of 15 per cent and contribute 24 per cent of total salaries tax receipts.

Although Mr Leung has widened the tax base with his new measures, the new 90,000 taxpayers that it has netted will pay just HK$100 each in tax -- which after administration charges are deducted amounts to essentially zero.

"So the additional tax revenues will mainly come from the same 300,000 people who already contribute the most tax, only now they will have to pay an additional HK$6 billion of the HK$6.8 billion extra tax revenue," Mr Lee said.

He estimates that a family of four with an annual income of HK$350,000 will see their tax rate of about HK$3,600 double to HK$7,200. Add in the foreign domestic helpers' new tax -- which at the end of the day still comes out of employers' pockets -- then a middle-class family will pay the government HK$8,400 more in taxes every year, a leap of 230.6 per cent.

The Chamber's Chief Economist David O'Rear said he believes that the loss in revenue from land sales, which has plunged from over HK$50 billion in 1999 to just under HK$15 billion last year, clearly shows that the government depended too much on land revenue to balance its books. This has forced it to try and get some revenue in from higher tax rates. As for the extra 90,000 wage earners paying HK$100 a year in taxes, he feels these have been brought into the net to give the impression of spreading the pain.