The Hong Kong Special Administrative Region (HKSAR) government will soon consult the Legislative Council on a proposed goods and services tax and then launch a nine-month public consultation on the new tax, Financial Secretary Henry Tang said Monday.

Speaking on Hong Kong radio Monday morning, Tang said he will complete the consultation work on the proposed tax reform and pass it on to the administration to decide whether to implement it or not.

"Hong Kong's tax base is limited and this is a persistent problem," Tang said, adding it is a good time now to have comprehensive and in-depth discussions on the introduction of a goods and services tax with solid economic growth, falling unemployment and relatively tame inflation.

As the economy moves in a cyclical pattern, Tang said, Hong Kong should grab this opportunity to think about introducing a new tax to enlarge the source of government revenue and stabilize public finances.

Tang added the consultation paper will propose exemptions to reduce the effect of any new tax and provide relief for taxpayers.

When devising a goods and services tax, the government will look at overseas' tax regimes, Tang said, adding that similar taxes have been in place for years in developed countries such as Singapore, Australia, Sweden and many European countries.

He stressed the goods and services tax is efficient as it is less vulnerable to economic downturns than the salaries tax, and Hong Kong needs a stabilized tax source to better plan for future education, welfare, medical and infrastructure spending.

As the city's population is aging, the number of workers and working taxpayers may decline in future, Tang said, thus threatening the source of government revenue.

Therefore the introduction of the goods and services tax would offer greater financial security, he added.

Source: Xinhua