The Financial Secretary has forecasted a budget surplus of HK$18.9 billion for the 2021-22 fiscal year, a significant turnaround from the original estimate of a deficit of HK$101.6 billion. This is primarily due to an unanticipated increase in land-related and profits tax revenue. Despite various one-off pandemic relief measures granted during the year, Hong Kong’s fiscal reserves remain strong at an estimated HK$946.7 billion as at 31 March 2022. This underlines the strong position of the Hong Kong SAR government’s books and resilience of the Hong Kong economy.
With the outbreak of the fifth wave of the pandemic, the government’s budget (the “Budget”) will provide much needed assistance to citizens and businesses severely affected by the pandemic. We are pleased to see that the government has adopted our proposed measure of issuing another round of electronic consumption vouchers to Hong Kong permanent residents and new arrivals. We believe this will be an effective measure to support citizens and businesses in the short term and stimulate local consumption. The electronic consumption vouchers also promote the development of a digital economy as part of the broader smart city blueprint.
Whilst no new taxes are proposed in this year’s Budget, it is anticipated that there will be future tax law changes in Hong Kong. In particular, it is proposed that a progressive rating system will be introduced in 2024-25. Further, in response to the international tax reform proposals drawn up by the OECD, the government is looking to introduce a tax bill within 2022 to implement the OECD’s global minimum tax rate for large multinational enterprise groups with global turnover of at least 750 million euros. This will include the introduction of a domestic minimum top-up tax for these groups from the year of assessment 2024-25. This change will have a significant impact on many affected taxpayers and is forecasted to provide significant additional revenue. We suggest careful consideration of the tax system in general be given to make sure Hong Kong continues to be the leading business centre in Asia. We would also like to see that the government will make good use of the additional revenue collected to further enhance Hong Kong’s business environment and competitiveness.
There are various measures in the Budget focusing on strengthening Hong Kong’s position as an international trade and financial centre and a wealth and asset management hub. We support the continued focus in this area. The Budget proposed various tax and non-tax measures supporting the development of family offices, the maritime and port sector and innovation and technology sector. We suggest that further support is provided to the asset management industry, in particular, to ensure Hong Kong does not fall behind other financial centres. We are also pleased to see measures in the Budget that enhance the quality of the workforce and help attract talent to boost Hong Kong’s competitiveness in the long run.
In summary, this year’s Budget provides various measures and sweeteners to support citizens and businesses during the pandemic, while investing to further improve Hong Kong’s medium to long-term competitiveness. We hope that the government will release the implementation details quickly to help Hong Kong move further along the road to recovery.
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