The Hong Kong Government unveiled a new round of stimulus package of HKD137.5 billion on 8 April 2020 to support businesses and individuals as the COVID-19 outbreak continues to severely damage the global economy. The stimulus package represents approximately 5% of Hong Kong’s gross domestic product and covers a broad range of issues and sectors. These measures will go towards helping businesses stay afloat, alleviate some of the financial burden suffered by individuals and businesses and ultimately assist the Hong Kong economy in recovering after the COVID-19 crisis passes.
This latest round of stimulus builds on the HKD120 billion relief package announced in the 2020-21 Hong Kong Budget and also the HKD30 billion Anti-epidemic Fund approved by Legislative Council on 21 February 2020. The total relief provided by the Government to date has reached HKD290 billion, representing approximately 9.5% of Hong Kong’s gross domestic product. Details can be found here.
The key measures announced in the latest economic stimulus announced by the Government have four key components:
As part of an HKD80 billion Employment Support Scheme (ESS), the Government will provide a wage subsidy to eligible employers. The subsidy is calculated at 50% of the employee’s monthly wage, capped at an eligible salary of HKD18,000, for six months – a maximum monthly subsidy of HKD9,000 per employee. This is to assist eligible employers to retain their employees and is conditional on no redundancies are implemented by the employer. It is expected that 1.5 million employees will benefit from this scheme.
All private sector employers making MPF contributions will be eligible, not just those in particularity hard hit industries. Whether the scheme will cover all employees of such employers including those who are exempt from enrolling in the MPF, such as new employees or certain expatriates, need to be clarified. Key exclusions from the ESS include the Government, statutory bodies and Government subvented organisations. The Secretary for Labour and Welfare, Law Chi-Kwong, noted that employers would be given the flexibility to designate one of the months between January and April to be the basis on which the subsidy for that business will be calculated. The subsidy will be made to eligible employers in two tranches, with the first payment being no later than June 2020. Further details on how the subsidy will apply is expected to be released soon.
Employers in other sectors such as catering, construction and transport (mainly taxi and red mini-bus drivers) which are not fully covered by the MPF scheme will be assisted in the sector-specific schemes. A one-off lump sum subsidy will be provided to self-employed persons who have made MPF contributions.
Other measures include creating 30,000 time-limited jobs in both public and private sectors in the coming two years, supporting job advancement projects for staff to upskill and helping enterprises to adopt and apply technology.
Additional funding of approximately HKD21 billion is to be provided to 16 specific hard-hit sectors including SME Exchange participants and SFC licensees, travel industries, construction-related enterprises, education, school bus operators and the aviation industry.
To further assist small and medium sized enterprises, the Government is also looking at enhancing the SME Financing Guarantee Schemes by increasing the maximum loan amount per enterprise depending on the guarantee amount. Concessionary interest rates of up to 3% will be provided for one year for loans under 80% and 90% guarantees.
Other measures include providing tenants of government properties a 75% rent concession for six months, waiving registration fees for medical workers for three years and deferring payment of salaries tax, personal assessment and profits tax due for payment in April, May and June 2020 by three months. The MTR Corporation will also reduce fares by 20% for six months commencing from 1 July 2020.
One of the worst hit industries during the COVID-19 crisis is the aviation industry with the industry coming to a virtual standstill. Further relief of HKD2 billion will be provided to the Airport Authority, airlines and its immediate supporting operators to ease pressure on their liquidity.
The Hong Kong Monetary Authority will increase its lending capacity to HKD1 trillion enabling banks to lend and provide individual clients “Principal moratorium” for a specified period to help provide liquidity to businesses, especially the SMEs.
In addition, all major insurance companies are offering a grace period of premium payment up to 30 to 180 days for holders of individual life, critical illness and medical policies for a specified period.
The economic impact of COVID-19 has been devastating for many local and global businesses. The latest round of measures is much welcomed to help alleviate the financial pressure on struggling businesses and individuals. However, there are several details in the implementation of the stimulus package that will need to be worked out.
Some key points to note include:
The IRD has also announced various administrative measures to assist taxpayers experiencing financial difficulties as a result of the COVID-19 outbreak including:
Overall these measures are a further welcome addition to the Government support for hard pressed businesses in Hong Kong. We encourage all businesses to carefully consider their eligibility for the grants and other relief measures. This includes considering the impact, if any, that measures already taken to save costs may have on eligibility for the ESS. Until the details of the scheme are available we suggest employers act with caution on taking other cost saving measures. While anticipating further details on how to access these measures will be available shortly, we encourage the Government to act swiftly to get money into the economy.