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Fruit of Concerted Efforts
 Government's cost containment efforts are starting to bear fruit. Operating expenditure for 2004-05 will be $2 billion lower than for 2003-04 - a drop for the first time in more than 50 years |
 Hong Kong is the first place outside the Mainland to conduct personal RMB business, including deposit-taking, currency exchange, remittances and credit cards. Nearly all retail banks in Hong Kong are providing most of these services. The development of this business has been encouraging |
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 Forging ahead with CEPA Phase II: domestic exports of 1 108 products to the Mainland are enjoying zero-tariff treatment; liberalisation of trade in services has been extended to 26 sectors |
 Successful issuance of $26 billion in bonds. The offerings have set a number of records in the region and were oversubscribed by local and international investors alike. These help promote development of our bond market |
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 Visitor arrivals in 2004 reached an all-time high of 21.81 million, with 4.26 million attributable to Mainlanders under the Individual Visit Scheme. The latter generated an additional $6.5 billion in tourist spending and led to the creation of 16 500 new jobs |
 $200 million Partnership Fund for the Disadvantaged formally set up to foster the development of a tripartite relationship between the Government, the business community and the non-government organisations to help socially disadvantaged groups |
Resuming Growth Trend
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Real economic growth was 8.1% in 2004. Forecast GDP growth is 4.5%-5.5% in 2005. Trend GDP real growth rate is forecast at 4% a year
- The 68-month-long deflation ended in July 2004. CPI Inflation in 2005 is expected to be 1.5%
Prudently Managing Public Finances
- The Consolidated Account is estimated to have a surplus of $12 billion in 2004-05 - the first surplus since 1999-2000. After discounting proceeds from bond issuances, a deficit of
$13.4 billion remains
- A consolidated deficit of $10.5 billion is estimated for 2005-06, and this will gradually decline. Fiscal balance will be achieved in 2007-08, a year earlier than the original target. Balance in
the Operating Account will be restored in 2008-09 as scheduled
Building on Our Strengths and Fostering Growth
- Earmark $500 million to:
- support the Hong Kong Tourism Board in launching global publicity and promotion programmes and introducing brand new tourism products
- extend the Quality Tourism Services Scheme, improve customer services and enhance
consumer protection
- Abolish estate duty to promote development of our asset management business
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- Transfer $200 million and provide an additional $300 million to the SME Export Marketing Fund and the SME Development Fund to help SMEs enhance their competitiveness

An Equitable and Sustainable Society
- Appoint an independent committee to review existing competition policy and mechanisms
- Relieving people's tax burden:
- Introduce basic and additional allowances at $15,000 each for taxpayers caring for dependent parents or grandparents aged between 55 and 59. About 100 000 taxpayers will benefit from these measures which will cost
the Government $450 million a year
- Increase the child allowance from $30,000
to $40,000 per child. About 300 000
taxpayers will benefit and cost to Government will be $620 million a year
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- Earmark $830 million for Buildings Department to continue to remove unauthorised structures, improving the safety and appearance of old buildings and creating job opportunities
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- Study the introduction of "green" taxes:
- Product responsibility scheme for waste tyres
- Plastic bags
Studies on Other Taxes
- No change to existing alcohol duties
- Launch public consultation on broadening the tax base through a goods and services tax
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