Hong Kong's Financial Secretary Paul Chan Mo-po delivers his annual budget speech at the Legislative Council in Hong Kong, Feb 22, 2022. (CALVIN NG / CHINA DAILY)
HONG KONG – Financial Secretary Paul Chan Mo-po unveiled tax relief for first-time homeowners and pledged vouchers in his seventh budget and the first since Hong Kong fully opened up, with a stress on resilience and the theme: "Leaping Forward Steadily, Together We Bolster Prosperity under Our New Vision".
The government will take a "moderately liberal" fiscal stance this year, he said while presenting a deficit budget at the Legislative Council on Wednesday, promising that more than 80 percent of the budget initiatives will benefit the general public and small and medium-sized enterprises.
Economic snapshot
Citing how the Hong Kong economy contracted by 3.5 percent in 2022, Chan forecast a visible rebound with a 3.5 to 5.5 percent growth for the year.
The economy will grow by an average of 3.7 percent per annum in real terms from 2024 to 2027, said Chan
He said the underlying inflation rate and the headline inflation rate will rise to 2.5 percent and 2.9 percent respectively this year.
Referring to Hong Kong's unique advantages under the "one country, two systems" policy, the finance chief said the Hong Kong Special Administrative Region government strived for better integration of a "capable government" and an "efficient market".
He said the economy will grow by an average of 3.7 percent per annum in real terms from 2024 to 2027, higher than the trend growth of 2.8 percent during the decade before the epidemic. At the same time, he forecast the underlying inflation rate to average 2.5 percent per annum.
Vouchers
The government will issue electronic consumption vouchers valued at HK$5,000 again this year to each eligible Hong Kong permanent resident and new arrival aged 18 or above in two instalments, said Chan.
READ MORE: HK to balance economic revival, sustainability in budget
Customers buy goods from a shop with a sign that reads "We accept consumption vouchers" at a market in Tsuen Wan on April 4, 2022. (ANDY CHONG / CHINA DAILY)
The first disbursal valued at HK$3,000 was pledged in April. Non-residents admitted through different schemes or to study will receive vouchers worth HK$2,500, he added.
Lower stamp duty and housing
In a major relief, Chan said first-time permanent resident homebuyers will be allowed to pay a lower ad valorem tax if they buy small to medium-sized residential units.
The measure, whose details will be gazetted on Wednesday under a Public Revenue Protection Order, is expected to benefit 37,000 buyers and cost the government about HK$1.9 billion per year.
Potential land supply this year could yield about 20, 550 units, about 60 percent more than the annual demand of 12,900 units projected in the Long Term Housing Strategy, he said.
The financial secretary pledged to secure land for production of no fewer than 72,000 private housing units in the coming five years.
The government planned to add 14,000 additional transitional housing units in the next two years, he announced, estimating that 19,000 private housing units will be added annually in the five years from this year onwards.
Tax relief
Chan also pledged to reduce salaries tax and tax under personal assessment for the assessment year 2022/23 by 100 percent, subject to a ceiling of HK$6,000, benefiting 1.9 million taxpayers.
Businesses are set to benefit from the reduction of profits tax for 2022-23 by 100 percent, subject to a ceiling of HK$6,000
He also promised rates concession for domestic properties for the first two quarters of 2023‑24, subject to a quarterly ceiling of HK$1,000 for each rateable property, involving 3.03 million domestic properties. A similar rates concession was extended to non‑domestic properties.
Similarly, businesses are set to benefit from the reduction of profits tax for 2022-23 by 100 percent, subject to a ceiling of HK$6,000, involving 134,000 businesses.
ALSO READ: HKICPA calls for tax relief in Budget to enhance city's appeal
The financial secretary said the government will increase the basic child allowance and the additional child allowance for each child born during the assessment year from the current HK$120,000 to HK$130,000 starting from 2023-24.
Support for tourism industry
The Travel Agents Incentive Scheme, due to expire by end‑March 2023, will be extended for three months. In addition, HK$30 million will be injected into the Information Technology Development Matching Fund Scheme for Travel Agents, Chan said.
He pledged new schemes to offer fully guaranteed loans for eligible passenger transport operators and licensed travel agents.
Green push
Pointing out how the country was advancing towards the "3060 Dual Carbon Targets", the finance chief said he would set up a Green Technology and Finance Development Committee, inviting industry representatives from green technology, green finance, and green standard certification, etc. to help frame agenda to develop Hong Kong into a global hub.
Financial Secretary Paul Chan forecast a visible rebound of Hong Kong economy with a 3.5 to 5.5 percent growth for the year. (ANDY CHONG / CHINA DAILY)
Attracting talent, incubation & focused development
To encourage re‑domiciliation of companies to Hong Kong, the government will conduct consultations and submit legislative proposals in 2023‑24. The government will also introduce a new Capital Investment Entrant Scheme, allowing applicants to make investments in the local asset market, excluding property and reside and pursue local development, Chan said in his proposal.
Of HK$10 billion pledged in the last budget to boost life and health technology development, HK$6 billion will be set aside to subsidize universities and research institutes to set up thematic research centers. HK$3 billion will be set aside to boost research in artificial intelligence and quantum technology. Also, a Microelectronics Research and Development Institute will be set up to promote microelectronics development in Hong Kong, he said.
The government will issue HK$5,000 e-vouchers valued this year again to eligible permanent residents and new arrivals aged 18 or above
Chan said HK$400 million will be injected into its Corporate Venture Fund to help tech startups.
He pledged to earmark HK$265 million for Cyberport to launch a dedicated incubation program for smart living startups, with a HK$500,000 grant for targeted professional support and counseling.
The government will plan ahead to provide more advanced manufacturing space, he added.
Chan cited the "Airport City" development strategy and a series of measures by the Airport Authority Hong Kong to support the recovery of air traffic.
He said a bill will be introduced at the LegCo in the fourth quarter of this year to set up an aircraft leasing preferential tax regime.
READ MORE: HK's economic outlook more positive after reopening, says Chan
According to Chan, HK$20 million will be set aside to boost strategies for promoting the maritime service industry and enhance international and exchanges across the Guangdong-Hong Kong-Macao Greater Bay Area.