Hong Kong – Financial Secretary, Paul Chan Mo-po, delivered his speech on the Hong Kong Government’s 2019/20 Budget (the “Budget”) today, proposing an array of relief measures amounting to over $42.8 billion, which include funding and tax incentives for sectors such as finance, innovation and technology, healthcare and tourism. The innovation and technology industry is set to develop and create employment opportunities with the goal of bringing tremendous benefits to the Hong Kong economy and improving the liveability of the city.
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William Chan, tax partner at Grant Thornton Hong Kong, said, “Against the backdrop of global economic uncertainties, the Budget pledges financial support and investment to reinforce the city’s economy and enhance the liveability. However, we still have not seen any concrete measures to address the long-overdue call for broadening the tax base in order to ensure fiscal sustainability for future challenges and opportunities. While greater prominence should be given to the housing issues of different social classes, the government should also introduce tax incentives to fully exploit the opportunities arising from the Greater Bay Area Initiative.”
Call for a more comprehensive strategy for I&T development
In a bid to attract more technology enterprises and start-ups to set up offices in the city, the Financial Secretary will reserve $5.5 billion for the development of Cyberport 5, thereby creating career opportunities in I&T for young generation. The Budget also plans to launch a $2 billion Re-industrialisation Funding Scheme to subsidise manufacturers to set up smart production lines in Hong Kong. The Financial Secretary also proposes to regularise the Technology Voucher Programme and double the funding ceiling to $400,000. To cultivate local technology talents, the Government will set aside $16 billion to improve R&D-essential facilities in UGC-funded universities and $500 million to support the implementation of the IT Innovation Lab in Secondary Schools Programme.
“We appreciate that the Government takes the initiatives to support I&T development by providing funding and incentives as well as nurturing local technology talents. However, the Budget does not address which area of I&T development, namely biotechnology, artificial intelligence, smart city and Fintech, should be emphasised in a targeted and organised manner. We suggest the Government to take long-term measures such as launching a comprehensive blueprint on I&T development directions”, said Mr Chan.
Supporting the public medical system
In view of the overburden of the public healthcare system, the Budget proposes to set aside additional recurrent funding of over $700 million in order to support the frontline medical officers and rehire retired medical officers. The Government also plans to provide an additional $5 billion for upgrading and acquisition of medical equipment as well as relevant training. To support the Hospital Authority in case of unexpected circumstances, the Government will also earmark $10 billion to establish a public healthcare stabilisation fund.
Mr Chan said, “We suggest the Government to take a holistic approach to ease the pressure on the public medical services, such as exploring the feasibility of simplifying the administrative procedures of allowing overseas medical specialists to practise in Hong Kong or subsidising patients for private medical treatment while capping private health care fees. Also, more resources should be allocated to the training of healthcare professionals and workers in response to the rising demand of manpower for public medical services underpinned by the ageing population.”
Tax reform to save for a rainy day
In response to the problem of unaffordable living cost of the city, the Financial Secretary proposes a series of tax relief measures, including the one-off reduction of both salaries tax and tax under personal assessment as well as profits tax by 75% each, subject to a ceiling of $20,000, the exemption of rates for four quarters, subject to a ceiling of $1,500 per quarter, extra allowance for social security recipients. The Government will also provide NGOs with $2 billion to support constructing transitional housing.
Mr Chan said, “We appreciate that the Budget proposes a series of relief measures to lessen the burden on employees and enterprises in Hong Kong. However, despite the recurrent surpluses, Hong Kong is at risk of structural deficits in the near future given our ageing population and shrinking workforce. The Government should expedite the tax reform to widen its tax base and study on new taxes for the long-term prosperity of Hong Kong.”
Capitalise on the Greater Bay Area Initiative
With a view to enhancing the global competitiveness of Hong Kong, the Government plans to inject another $1 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales while increasing the funding ceiling for enterprises and further extending its geographical scope to include all economies which have entered into Free Trade Agreements with Hong Kong. The Budget proposes to inject $150 million to the development of a dispute resolution online platform to enhance the development of LawTech in Hong Kong, as well as consolidating Hong Kong’s position as an international dispute resolution services centre.
Mr. Chan concluded, “As technological innovation will serve as a major driving force for the Greater Bay Area, we believe the Government should step up its efforts to promote the development of advanced manufacturing industry and strengthen its competitive advantages as the leading financial and commercial centre in Asia by attracting overseas talents, granting tax incentives and providing a business enabling environment to help bolster the high technology industry. It is vital for Hong Kong to facilitate the flow of people, goods and capital into the Greater Bay Area in order to realize the enormous growth of the Greater Bay Area Initiative. As such, we suggest tax or financial initiatives that help reduce the mainland corporate tax rate suffered by Hong Kong companies with business in the Greater Bay Area and individual income tax paid by Hong Kong residents who work or live in the Greater Bay Area under certain criteria.”
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