Members of the Commission on Strategic Development (CSD) have urged the government to cut profits and salaries taxes in the next financial year.

Keeping in mind the huge fiscal reserve and the very healthy Exchange Fund, members have also pressed for more aggressive investment portfolios to earn higher incomes for the government.

At the seventh meeting of CSD's Committee on Economic Development and Economic Cooperation with the Mainland yesterday, head of the Central Policy Unit Lau Siu-kai summed up the members' views, saying they had sought reduction in profits and salaries taxes in the 2007-08 budget.

Members justified their plea for the tax cuts, saying the fiscal reserves were in very good health and the Hong Kong Monetary Authority had a cumulative surplus.

Lau told a press conference: "Some members have suggested that since the fiscal position is improving the government cut taxes slightly to repay the people who suffered during the economic downturn a few years ago.

"In their opinion, tax reduction would help improve social harmony and ease the troubles of the middle class."

Also, some members have suggested that the government adopt more aggressive investment portfolios in the shares of State-owned enterprises and yuan-transacted assets, Lau said.

"By doing so, the government can raise its income, and therefore reduce the possibility of increasing taxes," he quoted the members as having said.

They have advised the government to improve the business environment to attract more foreign investors to set up shop in Hong Kong.

The government should make efforts to promote the development of new creative industries such as pharmaceuticals and hi-tech that involve approval of patent rights in Hong Kong, they have said.

Some members have expressed fears over the falling government investment in infrastructure, and said it would not be conducive to economic development and creation of new jobs.

They, however, know the matter is very complicated and involves lengthy procedures and political interests, and some people have even moved court to stop projects.

"As a result, such projects are seriously delayed or even aborted despite availability of funds," Lau said.

"To resolve the impasse, it has been suggested that experts and stakeholders be included in the planning process so that all the views can be heard and tackled at the early stage."