Hong Kong braced for tax blow

BUSINESSES and residents of Hong Kong were braced for the city's annual Budget address today which may include a tax on goods and services.

The move would be the biggest shake-up of the government's revenue streams for decades and comes as Financial Secretary Henry Tang tries to curb a run of budget deficits.

Hong Kong has relied on revenues from property sales to generate up to 40% of its income. But as prices slumped after the regional financial crisis, income from the sector dwindled.

Tang, however, may be reluctant to impose a levy on the tax-averse former British colony as the administration is already under pressure over the pace of democratic reform.

Analysts say Tang may declare his support for the tax but delay implementing it for some years.

Hong Kong's accountancy body has estimated that a 3% tax would rake in up to HK$23bn (£1.6bn) by 2008. The current deficit is about three times that.