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Commentary

Hong Kong has reported a budget deficit of HK$257.6 billion for the 2020-21 fiscal year, the largest deficit in 20 years. This is primarily due to the one-off pandemic relief measures granted in the past year. However, even with this deficit, Hong Kong fiscal reserves remains strong at an estimated HK$902.7 billion as at 31 March 2021. This clearly demonstrates the underlying strength of Hong Kong SAR government’s books and economy in general. 

While reduced from last year, the government’s budget (the “Budget”) will continue to provide much needed assistance those affected by the ongoing COVID-19 pandemic. We are pleased to see that the government has adopted our proposed measure of issuing electronic consumption vouchers to Hong Kong permanent residents. We believe this will be an effective and targeted measure to support business areas that have been most affected by the pandemic, and at the same time, promote Hong Kong as a smart city.

Whilst no new taxes were introduced in this year’s Budget, the government proposed increasing the stamp duty on stock transfers. Given the city’s robust capital markets and anticipated increased IPO activity in the coming months, this is expected to raise additional revenue of HK$12 billion. However, it is important for Hong Kong’s capital markets to stay competitive with its global peers, many of which are trending towards reducing or removing such duties. The impact of these measures should be kept under review given the ongoing challenges and uncertainties in the global economy. We agree with the Financial Secretary that this is not the time to introduce new taxes. The introduction of future taxes should always be done with careful review considering the long-term revenue needs and with as much consensus as possible with the community.

We also welcome the continued focus on strengthening Hong Kong’s position as an international financial centre and a wealth and asset management hub, especially measures to support green finance and the development of relevant tax measures to support the growth of family offices in Hong Kong. The Budget also proposed various investments supporting the development of technology and innovation across multiple sectors in order to adjust to post-pandemic realities. As the pandemic continues to reshape Hong Kong’s economy, the government should consider extending more support to employees of pandemic-affected industries for re-training and skills development.

In summary, this year’s Budget substantially follows past years’ mixed bag of measures and sweeteners designed to address a wide range of expectations from the general public.  We hope that the government will release the implementation details quickly to help Hong Kong move further along the road to recovery.

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The information contained in the Hong Kong Budget Summary 2021-2022 is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Legislative proposals do not generally become law until their enactment and may be modified by the Legislative Council before enactment.

It should be noted that the information is presented in summary form and readers are advised to seek professional advice before formulating business decisions.

© 2021 KPMG Tax Services Limited, a Hong Kong limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

© 2021 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.