Aerial photo taken on May 29, 2022 shows a view of the Two International Finance Centre (IFC) in South China's Hong Kong. (LI GANG / XINHUA)
The Hong Kong Special Administrative Region government could see “positive growth” in its fiscal reserves this year as the city opens up further to the world, predicts accounting and consulting group PwC.
The accounting giant also forecast on Wednesday a HK$109-billion ($13.9 billion) consolidated budget deficit for the SAR, with overall revenue of HK$681 billion and expenditure of HK$790 billion for the period from April 2022 to March this year. This compares with a surplus of HK$29.4 billion recorded for the previous fiscal year.
Hong Kong’s fiscal reserves at the end of March this year stood at around HK$848.1 billion — equivalent to about 12 months of total government spending — PwC said.
PwC urged the HKSAR government to consider providing tax and non-tax support for specific industries and talents to help businesses and citizens recover from the COVID-19 pandemic and beef up Hong Kong's competitiveness
The company urged the SAR government to consider providing tax and non-tax support for specific industries and talents to help businesses and citizens recover from the COVID-19 pandemic and beef up Hong Kong's competitiveness.
It also proposed that the government should continue offering a one-off reduction in profits tax, salaries tax and tax under personal assessment for 2022/23, while increasing the tax ceiling to HK$25,000 in each case, so as to lighten the financial burden of individuals and enterprises.
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“Due to the challenges, such as the ongoing pandemic and geopolitical issues, we expect government expenditure to remain high. We’re confident that Hong Kong’s fiscal reserves will return to positive growth in the coming year, especially after the resumption of normal travel with the Chinese mainland,” said Charles Lee, PwC South China and Hong Kong tax leader.
“The government should further consider long-term plans for financing infrastructure through alternative means, such as securitization and infrastructure funds,” he said.
It’s hoped there’ll be effective tax and non-tax incentives in place to support the pillar and emerging industries, as they’ll help to revitalize Hong Kong’s economy and boost its competitiveness as part of the Guangdong-Hong Kong-Macao Greater Bay Area and a soon-to-be member of the Regional Comprehensive Economic Partnership, Lee said.
PwC Hong Kong Tax Partner, Agnes Wong, said: “With the gradual lifting of travel restrictions and quarantine requirements around the world and the resumption of quarantine-free travel with the mainland, Hong Kong should be prepared for a travel boom and seize the opportunity to get the city back to pre-COVID levels of economic growth.”
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“It’s important for the government to consider all proposed plans and measures carefully and to take into account stakeholders’ concerns during their implementation, and execute them efficiently and effectively through a smart government,” said PwC Hong Kong Tax Partner Kenneth Wong.
“As tax rules become increasingly complex, the government should make use of tools to administer the law and facilitate taxpayers’ compliance in a streamlined manner,” Wong said.
Contact the writer at suzihan@chinadailyhk.com