HK 2016/17 budget shows commitment to long-term growth, but lacks exciting relief measures
Published: 24 February 2016
The Financial Secretary delivered a budget which shows commitment to long-term growth with measures to nurture innovation, identify new markets and foster talent development. However, there is a lack of exciting short-term relief measures to help mitigate pressure for companies and the general public in face of unstable economy.
“The government should receive applause for its focus to nurture innovation and identify new markets, which can energise our long-term growth under the new economic order. One of the major driving forces is rapid development of information technology. There are programs and measures to promote research and the development of start-ups and creative industries. The government is also aware of the importance to encourage the development of Fintech, which will play a pivotal role in shaping the future of Hong Kong as one of the preeminent financial centres globally,” said Mrs Yvonne Law, Partner, Clients, Industries and Markets, Deloitte China.
The budget proposed initiatives to help Hong Kong find new markets, such as the launch of the three runway system of the airport, the pursuit of trade and investment agreements, and the support for the work of Asian Infrastructure Investment Bank. These measures serve to leverage Hong Kong’s long standing competitive advantages of having one of the most efficient and transparent regulatory regimes, and are also in tandem with the deepening of reforms in China.
The budget included tax and short-term relief measures of HK$38.8 billion, including reduction in profits tax and salaries tax for 2015-16, waiver of business registration fees for 2016-17, waiver of rates for four quarters of 2016-17 and waiver of licence fees for restaurants, hotels and guesthouses for a year.
“However, the proposed short-term relief measures appeared to be unexciting. With ample fiscal reserves, the government could be more aggressive in relief measures, especially for the business community. In terms of coverage, nearly two million tax payers will benefit from the increase in basic allowance and married person’s allowance. While the government has the foresight to invest our fiscal reserves for long term investment through the Future Fund, there were no action points to address the problem of a narrow tax base,” said Davy Yun, Tax Partner, Deloitte China.
To support the middle class, the government could have considered introducing tax allowances for working couples and deductions for expenses relating to children’s education and salary to domestic helpers. The budget could also have introduced deductions for “medical insurance premium” for taxpayers and their dependents. In addition to financial services, the government should consider promoting Hong Kong as an international trading centre, taking advantages of our geographical advantages as the centre for Asia. To this end, the budget could have put forward tax incentives for companies set up by foreign investors to engage in trading business in Hong Kong.
When it comes to elderly care, the budget set aside HK$800 million for providing 3,000 vouchers for elderly residential care services under a three-year pilot scheme. It also proposed to provide one month extra allowance to recipients of CSSA, Old Age Allowance, Old Age Living Allowance and Disability Allowance.
“Deloitte welcomes these measures; but in the long term, the government will need a more comprehensive plan to tackle aging population. We are pleased that the government has held consultations on setting up a universal retirement scheme. We hope the government is able to find a solution that balances the need for retirement care and allay the monetary pressure on long-term expenditure,” said Alfred Chan, Tax Director, Deloitte China.