Hong Kong SAR Budget 2018/2019
The Financial Secretary for the Hong Kong Special Administrative Region (HKSAR), Mr. Paul Chan, has delivered his second budget on Wednesday, 28 February 2018.
Our coverage includes a commentary and analysis in response to the Budget prepared by the Deloitte Hong Kong Budget Team, led by Ms. Sarah Chan, Tax Partner of Deloitte China, and a summary highlighting the key proposals.
A holistic budget that addresses a wide range of economic and welfare measures for the future
On 28 February 2018, Financial Secretary Paul Chan Mo-po delivered the first budget under the new government led by HKSAR Chief Executive Carrie Lam Cheng Yuet-ngor. It is a holistic budget that not only addresses a wide range of economic and welfare measures, but also braces the city for emerging challenges, boosts Hong Kong's overall competitiveness, and improves its living environment. While the budget provides measures to bolster innovation and technology industries, there remains a lack of tax incentives to support start-up companies, who play a pivotal role in driving the development of new technologies.
"This year, the budget carries three overarching objectives, including achieving economic diversification, investing for the future and showing care for citizens. Leveraging our abundant financial surplus, the government has responded to many immediate requests from the community, while ensuring adequate resources to strengthen our economy through diversification, improve our competitiveness, optimize our living environment, and prepare for unprecedented challenges such as the aging population and shortages in medical services," said Sarah Chan, Tax Partner Deloitte China.
Deloitte welcomes the government's three-pronged vision, in particular its proposed specific measures to bolster strategic traditional and new pillar industries, including innovation and technology, financial services, tourism, trading and logistics, business and professional services, creative and construction. Among them, HKD 50 billion will be earmarked for driving the innovation and technology development, with another HKD 500 million as dedicated provision for the development of the financial services industry.
Summary of Tax Measures
Hong Kong Tax News
Issue 70 - 28 February 2018
This Tax Newsflash summarized the major proposals with respect to tax and business, including:
- Major Proposals
- Salaries Tax
- Profits Tax
- Property Tax
Against the backdrop of a massive financial surplus and a volatile macro-economic climate, including the recent U.S. tax reform and the ongoing developments under the OECD’s Base Erosion and Profit Shifting (BEPS) project, the Financial Secretary announced a wide range of measures designed to maintain local economic sustainability and address the changes in the global economic environment. The 2018/19 Budget aims at enhancing Hong Kong's competitive edge as a financial hub for multinational corporations, fostering the development of pillar industries, encouraging growth in the innovation and technology (I&T) and research and development (R&D) sectors, and seizing opportunities created under the direction and strategies of China's economic development by leveraging Hong Kong's distinctive advantages. The 2018/19 Budget also demonstrates the government's commitment to utilize the surplus to address the needs of the population.
The HKD 138 billion surplus for FY2017/18 results mainly from Profits Tax and Salaries Tax receipts, land sales and stamp duty. The fiscal reserves are expected to reach a historical high of HKD 1,092 billion by 31 March 2018. It is not surprising that the general public has been expecting more sweeteners, one-time/short-term stimulus measures and increased public expenditure by the government. The 2018/19 Budget is considered detailed, comprehensive and abundant in measures to alleviate the tax burden, consistent with the general public's expectation. In addition, the government's forward-looking vision in investing for the future as demonstrated in various proposed initiatives is welcomed.