A woman shops inside a retail store that accepts consumption vouchers and offers big discounts in a mall in Hong Kong on April 6, 2022. (ANDY CHONG / CHINA DAILY)
Global auditing business advisory firm KPMG China has urged the Hong Kong Special Administrative Region to refine the consumption voucher program to lift the city's economy.
KPMG suggests that consumption vouchers worth of HK$5,000 ($641) be distributed to Hong Kong permanent residents and new arrivals, with some of them designated for certain business sectors like catering and entertainment. Residents aged 70 or above should also receive the handout through the Old Age Allowance scheme.
The firm estimates that the vouchers would cost the SAR government HK$33 billion that could boost the city’s economy by 0.7 percent.
KPMG China expects Hong Kong to register a budget deficit of HK$120.9 billion for the 2022-23 financial year, compared to the government’s estimate of HK$56.3 billion. It would be the SAR’s third budget deficit in the past four financial years, mainly attributed to the HK$35-billion less-than-expected revenue from land sales
“Tourism’s recovery following the pandemic would take between 18 months and two years. It is critical for the local consumption to help the economic recovery as well as boosting the confidence of various merchants to make investments, for example, hiring more people as well as opening more stores if they see an increase in demand,” said Stanley Ho, corporate tax advisory partner at KPMG China.
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KPMG China expects Hong Kong to register a budget deficit of HK$120.9 billion for the 2022-23 financial year, compared to the government’s estimate of HK$56.3 billion. It would be the SAR’s third budget deficit in the past four financial years, mainly attributed to the HK$35-billion less-than-expected revenue from land sales, as well as the reduced stamp duty income of HK$40 billion.
As a result, the government’s fiscal reserves would dwindle to HK$836.2 billion by the end of March this year.
“Profit and salaries tax receipts for the next financial year (2023-24) would be affected by the weak economic performance this financial year (2022-23) following the fifth wave of the COVID-19 pandemic. We still expect the government to record a budget deficit for the 2023-24 financial year,” said Alice Leung, corporate tax advisory partner at KPMG China.
The accounting advisory firm also recommends other immediate measures to relieve the financial burdens of taxpayers, such as providing a 100-percent tax rebate, capped at HK$20,000 for profits tax, salaries tax and tax under personal assessment; waiving 50 percent of the 2023-24 provisional tax for salaries tax; and providing rates concessions for domestic properties for 2023-24.
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KPMG China says some modifications to the tax regime should be made to attract talents to work in Hong Kong. They include introducing a tax concession where share-based remuneration offered to talents by strategic enterprises in Hong Kong would be exempt from salaries tax; shortening the period required for professional people to obtain permanent residency in the SAR — from seven years to four years; offering new salaries tax allowances, such as caregiver allowances, to encourage stay-at-home parents to return to the workforce; and revisiting the tax bands for salaries tax and considering to lower the salaries tax progressive rates.