Deloitte welcomes pragmatic budget, with clearer industry positioning for Hong Kong
Published: 27 February 2013
The Financial Secretary today delivered a compassionate, pragmatic and cautious budget, the first under the new government led by Chief Executive Leung Chun-Ying. One major highlight of the budget was the measures introduced to enhance Hong Kong’s competitive positioning in some sectors. While it provides some easing measures to address immediate concerns, the budget needs more concrete action plans to support its measures.
“We should give the government a warm applause for positioning Hong Kong as one of the pivotal logistics and asset management centres in the region. Going forward, it is necessary to have coordinated efforts to promote this competitive position internally and externally in order to provide clear direction to investors and citizens,” said Mrs. Yvonne Law, Tax Managing Partner – Eminence and Business Development, Deloitte China.
Deloitte says it welcomes the government’s measure to extend profit tax exemptions to offshore funds by including transactions in private companies incorporated outside Hong Kong, something the industry has long been seeking. The move will help position Hong Kong as an international asset management centre. However, the government can consider further extending the exemption to include local funds as well, in order to truly enhance the industry in the territory.
To promote the development of logistic industry, the government also announced it will designate 12 hectares of land in Tuen Mun West and Tsing Yi for developing more than 300,000 square metres of logistics facilities, creating 7,500 new jobs.
Deloitte is also pleased to see the government will have a continued focus on clamping down on tax evasion and avoidance as an attempt to protect its income while maintaining the existing low and simple tax regime.
A number of supportive measures were also directed toward small and medium enterprises (SMEs), including waiving business registration fees for 2013-2014, reduced profits tax for 2012-2013 by 75% up to a maximum of HK$10,000 and increasing the cumulative amount of the grant under the SME Export Marketing Fund from HK$150,000 to HK$200,000.
However, Deloitte says further consideration needs to be given to reducing the corporate profits tax rate from 16.5% to 16% in order to attract more investors into Hong Kong.
The budget also included a number of one-off relief measures, including personal tax reductions and increased child allowances. The deduction ceiling for self-education expenses was raised to $80,000, a move Deloitte says it has been recommending for several years. The previous deduction ceiling was HK$60,000.
Personal salaries tax was reduced by 75%, up to a maximum of HK$10,000, down from last year’s ceiling of HK$12,000. Basic and additional child allowances were increased to HK$70,000 per child, up from HK$63,000. Deloitte says while these increases are appreciated, other personal allowances have not increased, which ultimately means the middle class will not benefit as much from this year’s one-off measures.
"The budget mentions projects to address Hong Kong’s increasing demand on elderly and public healthcare services due to an aging population. However, Deloitte says it is disappointed the government has not included a personal deduction allowance to help Hong Kong citizens purchase their own personal medical insurance. A maximum deduction of HK$20,000 per year to be used for medical insurance will more adequately relieve the burden of public medical spending," said Davy Yun, Tax Partner, Deloitte China.