Hong Kong’s fiscal position remains ‘enviable’ despite deficit as economy recovers from pandemic

Consumption vouchers and tax incentives in 2023-24 Budget key to stimulate consumption and investment

Consumption vouchers and tax incentives key to stimulate consumption and investment

22 February 2023

Continuation of consumption voucher scheme and immigration plans in 2023-24 Budget aim to boost recovery
Tax incentives would help develop Hong Kong’s industries, while issuance of bonds could boost bond market

22 February, 2023, Hong Kong (SAR), China ("Hong Kong") - KPMG China welcomes the Hong Kong government’s budget, which will support businesses and citizens while promoting the Hong Kong economy’s further recovery from the Covid-19 pandemic. Despite a forecast fiscal deficit which is 2.5 times the original, the government’s fiscal reserves remain healthy.

John Timpany, Head of Tax in Hong Kong, KPMG China, says:

“The larger than estimated budget deficit is understandable, as Hong Kong’s economy is still recovering. The deficit was expected as Hong Kong was hit very hard by the Covid-19 pandemic in early 2022 and also impacted by the severe external environment. It is worth noting that fiscal reserves are still very strong and healthy, equivalent to 12 months’ government expenditures, and many overseas governments would envy Hong Kong’s fiscal position.

Alice Leung, Tax Partner, KPMG China, says:

We welcome the issuance of HKD 5,000 worth of electronic consumption vouchers and support the government’s decision to continue the consumption voucher scheme as the economy is still recovering from Covid-19 pandemic. The consumption vouchers will help stimulate consumption in the short term, which the government needs. Moreover, the announcement of the Capital Investment Entrant Scheme to attract investments is also a good start.

Stanley Ho, Tax Partner, KPMG China, says:

We welcome the announced tax incentives such as the Patent Box tax incentives, which could help the government achieve its policy objectives and develop Hong Kong’s industries. Additionally, the issuance of green bonds and government bonds were announced to provide cash flow for the government, at the same time they would expand Hong Kong’s bond market, alongside its stock market to strengthen its status as an all-round capital city.

While KPMG China believes the immigration plans outlined by government are a strong beginning, the firm also urges the government to take further measures such as shortening the current 7-year requirement to 4 years for successful applicants / employees under Quality Migrant Admission Scheme, Top Talent Pass Scheme and the new Capital Investment Entrant Scheme to make such schemes more attractive and comprehensive in attracting talent and investments.

KPMG China believes that the government could fund more tax incentives and exemptions, to attract global companies to establish regional headquarters in the city, such as adopting 50% of the normal tax rate (i.e. 8.25%) for profits derived from regional headquarters in Hong Kong.

-Ends-

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