Commentary
On 26 February 2025, the Financial Secretary delivered the Hong Kong SAR Government’s (“the Government”) 2025-26 Budget (“the Budget”). The Budget was wide ranging in terms of measures to shore up the Government’s finances while maintaining investment in public services and longer-term capital projects. For the 2025-26 fiscal year, the Financial Secretary is forecasting a small operating deficit but a large deficit in the capital account. This is attributed to expectations of subdued land sales revenue, and significant expenditure allocated to ongoing capital projects.
The Financial Secretary also forecast an annual budget deficit of HKD 87.2 billion for the 2024-25 fiscal year, almost double its original estimate of HKD 48.1 billion. This is primarily due to the significant shortfall in land related revenue and stamp duty. Despite recording a third consecutive fiscal deficit, Hong Kong’s fiscal reserves remain relatively healthy, at an estimated HKD 647.3 billion as of 31 March 2025.
While the international geopolitical landscape and changes in local consumption patterns have created challenges, the local economy has continued to grow moderately. We support measures to:
- Encourage investment in new technology and encourage the Government to move quickly to use technology to improve the efficiency of Government services.
- Strengthen Hong Kong’s position as a major international financial centre. This includes removing barriers to market innovation. We are pleased to see that the Government has adopted our proposal of enhancing certain tax policies and rules including the tax incentives for funds and family offices. These measures, coupled with other initiatives to attract and assist the set-up of family offices in Hong Kong, should strengthen the city’s position as a key asset and wealth management centre. This should also create jobs and boost demand across a range of professional services to drive economic growth.
- Maintain value for money and restraint in Government expenditure without resorting to drastic spending cuts or significant tax charges / increases beyond those already announced.
- Prioritise investing resources in capital works projects that will improve the social and economic prospects for the people of Hong Kong.
In summary, we are pleased to see a wide variety of measures proposed to boost local economic development and attract strategic international businesses. These measures will be crucial in maintaining Hong Kong’s competitiveness in the medium to long term and will help the city maintain sustainable growth. While there is always room for improvement, this is a prudent budget under the current circumstances.
Budget highlights
Tax summary
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The information contained in the Hong Kong Budget Summary 2025-2026 is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
Legislative proposals do not generally become law until their enactment and may be modified by the Legislative Council before enactment.
It should be noted that the information is presented in summary form and readers are advised to seek professional advice before formulating business decisions.
