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KPMG: Lower-than-expected budget deficit reflects underlying strength of Hong Kong’s economy

KPMG: Lower-than-expected budget deficit reflects un...

Targeted measures and continued expenditures crucial to drive economic recovery; Financial services, technology and innovation sectors highlighted as key growth areas to ensure city’s long-term competitiveness

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24 February 2021, Hong Kong – KPMG welcomes the Hong Kong SAR government’s budget (the “Budget”) which will provide assistance to industries and individuals affected by the ongoing COVID-19 pandemic. The Budget also contains a range of other measures designed to boost Hong Kong’s core industries and acknowledges the importance of supporting technology and innovation across multiple sectors crucial for the city’s long-term development.

John Timpany, Partner, Head of Tax, Hong Kong, KPMG China, says: “Hong Kong’s lower-than-expected budget deficit in FY2020, which resulted primarily as a result of one-off support pandemic relief measures, demonstrates the underlying strength of Hong Kong’s economy, as the city faced a deep recession due to the pandemic. 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.”

Alice Leung, Partner, Corporate Tax Advisory, KPMG China, says: “KPMG also welcomes 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 arrangements to support the growth of family offices in Hong Kong, which we believe are important to maintain Hong Kong’s long-term competitiveness. On an individual level, we are pleased to see that the Government has adopted our proposed measure of issuing electronic consumption coupons to Hong Kong residents which we believe will be an effective and targeted measure to make sure the stimulus is helping business areas that have been most affected, and at the same time, promoting Hong Kong as a smart city.”

Stanley Ho, Partner, Corporate Tax Advisory, KPMG China, says: “We note that the Hong Kong SAR government’s financial position remains strong, but it is also important for the government to spend carefully in times of deficit. The government’s decision to increase stamp duty on stock transfers reflects that the city’s robust capital markets and IPO activities may offer a quick solution to increase short-term tax revenues. However, it is also important for Hong Kong’s capital markets to stay competitive with global financial markets, many of which are trending towards reducing or removing such duties. As the economy improves, tax revenues will improve. The introduction of future taxes should always be done with careful review and as much consensus as possible with the community.”

The Financial Secretary has also highlighted the importance of supporting digitalisation across multiple sectors that are adjusting to post-pandemic realities. KPMG welcomes the Financial Secretary’s plan to provide tax incentives and investments to support technology and innovation, including talent training, STEM education, tech start-ups operating in the Guangdong-Hong Kong-Macao Greater Bay Area, expansion of tech infrastructure, R&D, and additional funding for companies to adopt information technology solutions and cover the expenses for providing relevant training to their employees, which are all crucial for Hong Kong to stay competitive in the new digital future.

 

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About KPMG China

KPMG member firms and their affiliates operating in mainland China, Hong Kong SAR and Macau SAR are collectively referred to as “KPMG China.” KPMG China is based in 27 offices across 25 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our clients are located.

KPMG is a global organisation of independent professional services firms providing Audit, Tax and Advisory services. We operate in 146 countries and territories and in FY20 had close to 227,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients. 

In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multidisciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.

Media enquiries:

Nina Mehra
KPMG
Direct: +852 2140 2824
Email: nina.mehra@kpmg.com

Isaac Yau / Isabel Kwok
Citigate Dewe Rogerson
Direct: +852 3103 0112/+852 3103 0123
Email: KPMG@citigatedewerogerson.com

 

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