The SAR Government and various international organisations have painted a rosy forecast for Hong Kong's economic performance this year. International Monetary Fund (IMF) delegates estimated growth for the year could hit 9.5 per cent, which is even higher than the government's 8.5 per cent forecast. Although recent financial figures tell a story of strong recovery for Hong Kong's economy, I have noticed that some sectors are still trying to break out of tight corners induced by keen competition from neighbouring areas and financing difficulties. Their business skies are not entirely unclouded.

Therefore, at a meeting with the Financial Secretary Donald Tsang last month, when he consulted Legco members' opinions on the next Budget, I put forward many economic proposals to sharpen the competitiveness of businesses and further improve the business environment.

No rush to raise fees and taxes
As internal consumption has yet to fully recover, I asked the Financial Secretary to hold off raising fees and taxes to avoid upsetting the pace of economic recovery. Given the current financial reserves and the lower-than-expected Budget deficit in the past two years, I consider that it is still acceptable to have a moderate Budget deficit next year.

I also proposed freezing fees and charges affecting the business sector and community for another year. These include fees for water and sewage, and various licenses, as well as profits and salary taxes to avoid overburdening the general public and the business community. On initiatives to improve businesses' competitiveness, I urged the government to enhance tax breaks for on-the-job training and R&D.

Maintain a simple and low tax system
I strongly objected to the proposal of introducing a progressive tax system on profits tax. One of the most important factors contributing to the prosperity of Hong Kong is the long held principle of maintaining a simple and low tax system. The introduction of a progressive tax will be no different than raising the profits tax and it will also complicate the current simple tax system. This will dampen investors' interest in Hong Kong and, in turn, its economic development. As global competition is increasingly keen, such changes to the tax system would raise the cost of business and drag down the competitiveness of the entire business sector.

I disagree with the IMF's proposal of introducing a sales tax and competition law in Hong Kong. The impact of a sales tax is far-reaching. Not only will it increase costs for businesses and their tax burden, especially the SMEs, but it will also affect domestic consumption as the tax may dampen consumer spending.

A competition law, if adopted, may bring instability to the business environment. Even without such a law, Hong Kong today can boast of having one of the best business environments and the freest economies in the world. Therefore, the government should not rush implementing such a law. Rather, it should implement competition-facilitated policies in some sectors according to their specific circumstances.

Tax concessions for ultra-low sulphur diesel
I voted in support of the recently passed motion in Legco to extend tax concessions for ultra-low sulphur diesel for one more year, on the grounds that high diesel price will directly affect consumption and business costs, and indirectly batter the economy. While the SAR economy has yet to fully recover, we should not underestimate the impact of raising fuel prices.

The cost of fuel in Hong Kong has long been high compared to global prices, and the retail price of diesel is still the highest in Asia -- even after the government reduced diesel tax by HK$0.89 per litre. Therefore, a lower price for fuel would increase the SAR's competitive edge. Extending tax concessions will certainly alleviate the problem in the near future, but for the long run, the government should adopt a policy to stabilise the price of fuel at a reasonable level.

To do this, the government should first force oil companies to increase their transparency on pricing to help bring oil prices in line with world standards. This is important because local oil companies are often criticised for being "quick to raise prices but slow to reduce them." Second, the government should proactively encourage new operators to enter the market through measures such as relaxing the bidding restrictions on petrol station operators and finding more suitable places to build petrol stations.

These measures are conducive to relieving pressure on the public and business sector and will help bring about an overall recovery to the territory.