KPMG survey results vs Budget proposals

KPMG survey results vs Budget proposals

We summarise how the 2018-2019 Budget proposes to address some of the concerns identified in the KPMG survey.

Summarises how the Budget proposes to address the concerns identified in our survey

roundabout

KPMG China recently conducted a survey of over 300 senior business executives about their business concerns in Hong Kong and their expectations regarding the 2018-2019 Hong Kong Budget. Our key survey findings are highlighted below:

Top priority for the 2018-2019 Hong Kong Budget

  • Almost half of the respondents consider strengthening Hong Kong’s position as an international business centre as the top priority for the 2018-2019 Hong Kong Budget.
  • Other respondents suggest capturing the ’Belt and Road’ and Greater Bay Area opportunities, and focusing on youth support.

Enhancing the competiveness of Hong Kong’s tax system

  • According to the respondents, the most effective measure to enhance competitiveness is introducing a tax incentive for regional headquarters.
  • Other views include introducing group tax loss relief and expanding the scope of tax exemption for funds.

Measures/new tax incentives targeting the middle class in Hong Kong

  • The majority of respondents suggest that the existing Salaries Tax bands and/or tax rates for individuals should be adjusted.
  • Other respondents prefer allowing a tax deduction for medical insurance premiums paid and introducing a working mother allowance.

Tax measures to promote R&D activities in Hong Kong

  • Results show that respondents equally support all three of the proposed measures for promoting research & development (R&D) activities in Hong Kong (i.e. ‘expand the scope of “approved research institutions” for R&D tax deduction purposes’, ‘allow tax losses incurred from R&D activities to be cashed out instead of being carried forward’ and ‘expand the scope of deductible intellectual property-related capital expenditure’).

Below we summarise how the 2018-19 Budget proposes to address some of the concerns identified in the KPMG survey:

Increase competitiveness and capture business opportunities

  • Extend the scope of the Profits Tax exemption on debt securities to attract corporate bond issuance
  • Set aside HKD 500 million for the development of the financial services industry
  • Expand the government’s network of Economic and Trade Offices, including setting up an office in Thailand, to enhance trade relations with ASEAN countries and support the ‘Belt & Road’ Initiative
  • Expand trade, investment and tax treaty networks to open up new markets

Promote R&D activities in Hong Kong

  • Set aside HKD 20 billion for developing the Hong Kong-Shenzhen Innovation and Technology Park
  • Inject HKD 10 billion in the I&T Fund supporting applied R&D
  • Allocate HKD 20 billion for establishing research clusters on healthcare technologies, and AI and robotics, as well as for upgrading facilities at the Science Park

Tax measures for individuals

  • Reduce Salaries Tax and tax under personal assessment by 75%, capped at HKD 30,000
  • Widen the Salaries Tax rate bands from HKD 45,000 to HKD 50,000
  • Increase the number of tax bands from four to five, and adjust the marginal tax rates to 2%, 6%, 10%, 14% and 17% respectively
  • Increase the basic and additional allowances for children and dependent parents or grandparents
  • Increase the tax deduction ceiling for elderly residential care expenses
  • Introduce a tax deduction for Voluntary Health Insurance Scheme premiums, subject to a ceiling of HKD 8,000
  • Propose tax deductions for purchasing deferred annuity products and MPF voluntary contributions

Connect with us