2013-2014 Budget consultation

Taxes and duties

31. Mr CHAN Kin-por sought information on the changes in the revenue from profits tax and salaries tax since 1997. PS(Tsy) said that for the years of assessment 2002-2003, 2007-2008 and 2010-2011, the number of taxpayers of salaries tax amounted to 1.2 million, 1.4 million and 1.5 million respectively, corresponding to 36%, 41% and 44% of the prevailing working population. As for profits tax in the above years of assessment, the number of tax-paying corporations were 55 000, 80 000 and 91 000, or 14%, 14% and 12% of the prevailing registered corporations respectively.

Fiscal reserves

37. Noting that the commitments for outstanding capital works ($368.5 billion), unfunded pension liabilities ($533.8 billion) and guarantees given ($94.9 billion) amounted to nearly $1,000 billion in total as at 31 March 2012, and far exceeded the balance of $669 billion of fiscal reserves in the same period, Mr CHAN Kin-por expressed concern whether this might adversely affect the cash flow of the Government. Mr CHAN also enquired about the reasons for the substantial increase of liabilities for public officers’ pensions at present value, i.e. from $470 billion as at 31 March 2010 to $533.8 billion as at 31 March 2011. Mr Kenneth LEUNG sought information on the assumptions behind the calculation of the unfunded pension liabilities. He also enquired how the reserves in the Civil Service Pension Reserve Fund (“CSPRF”) could be deployed and whether the balance of some $24 billion in CSPRF as at 31 March 2012 was recorded on a cash-based accounting. Mr James TIEN queried why the public officer’s pension obligations should be placed under the liabilities of the Government which he considered a rare practice in other jurisdictions. Mr SIN Chung-kai remarked that as the pension fund would be dispersed to eligible civil servants only in batches over a long time-span according to their years of retirement, this should not impact much on the Government’s cash flow.

Permanent Secretary for Financial Services and the Treasury (Treasury) said that about 120 000 public officers were entitled to pension benefits, on top of the some 100 000 retired civil servants currently receiving monthly pension payments. Given that the public officer’s pension scheme was a closed system, the number of pensionable public officers would not increase in the years ahead. Nevertheless, the long-term coverage for public pensions was re-assessed regularly by actuaries, based on a number of underlying factors and assumptions (e.g. inflation, length of pensionable service, pensionable emoluments and the specified pension factors for computation of pension benefits) for calculation of the present value of the future pension sum to be set aside. This had explained the increase in the unfunded pension liabilities. She stressed that the present value of pension liabilities of $533.8 billion would not require a one-off payment in a single fiscal year. For instance, the 2012-2013 pension expenditure was estimated at $23.1 billion, which would rise to some $50 billion by 2033, to be expended from the General Revenue Account (“GRA”). She added that only when there was a shortfall in GRA to meet the pension expenses would the reserves in CSPRF be utilized, and the current balance of CSPRF would be able to meet contingent payment of the pension expenditure in a fiscal year. FS supplemented that the anticipated amount of pension payments was presented as liabilities under the on accrual-based accounting for reference.

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