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Hong Kong drops unpopular GST plan

Hong Kong's government unexpectedly dropped, on 5 December 2006, a proposal to introduce a 5% goods and services tax (GST), citing heavy political and public opposition. It was six months into a nine-month consultation period.

Finance Minister Henry Tang told an Executive Council meeting: "The public understands that there is a need to widen the territory's tax base, but we have failed to convince them of the benefits of a goods and services tax." Tang said. He did not say whether the GST proposal would be resurrected at a later date.

Chief Executive Donald Tsang, who is expected to seek a second term of office in 2007, said he supports the decision not to pursue the GST. The reversal came just days before the appointment of an elite 800-member committee that will choose the next chief executive.

Tang urged Hong Kong's citizens to suggest alternative means of broadening the tax base and said the government would submit a final report in March, when the GST consultation period originally was scheduled to end.

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