The Financial Secretary, the Honourable Paul MP Chan, delivered his fourth budget which focused on providing relief to support enterprises and livelihoods, safeguard jobs and stimulate the economy. The relief measures, which include the HKD10,000 cash pay-out to all Hong Kong permanent residents aged 18 or above, will substantially contribute to the government’s 2020-21 deficit, estimated at HKD139.1 billion, or 4.8 per cent of GDP. Details on the much-anticipated cash pay-out scheme are yet to be announced. The government could consider consumption vouchers (or a combination of cash and vouchers) to boost domestic consumption demand and provide immediate relief for those sectors that were most affected by recent events and the economic downturn that is expected to continue in the near term.
Similar with previous years, relief measures are generally one-off rebates and waivers. There are no changes to tax rates or bandings, with the usual rebates for Profits Tax and Salaries Tax. The Financial Secretary also reiterated the government’s continuing support for various sectors including tourism, shipping and asset management. KPMG welcomes the announced tax measures including those to attract private equity funds and asset managers to Hong Kong. Looking forward, the Financial Secretary suggested that significant changes to the Hong Kong tax system may be required in response to local fiscal needs and, more importantly, international tax developments. The proposed wide community consultation will be important to ensure any changes do not adversely impact Hong Kong’s position as Asia’s premier business gateway.
The economic downturn and increasing expenditure mean the government is forecasting deficits over the next five years. Nevertheless, the government’s strong fiscal reserves mean Hong Kong is well placed to weather these “rainy days”. In the medium to long term, the government should focus on economic and social development. This includes supporting the ongoing Smart City, R&D and Technology and Innovation initiatives in Hong Kong. We are pleased to hear that the Financial Secretary acknowledged the need to strengthen our pillar industries, while developing emerging industries to identify new growth engines. We look forward to seeing more policies on this front.
National Head of Tax
Head of Tax, Hong Kong
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© 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.