HONG KONG, Feb 26 (Reuters) - The following are highlights of Hong Kong’s budget for the 2020/21 fiscal year starting in April.
Hong Kong is to announce plans for its largest budget deficit in at least a decade to cushion the shock of often-violent protests and the outbreak of a coronavirus on the recession-hit economy.
Many companies in the tourism and retail sectors are struggling to survive as a partial closure of the border reduces visitor arrivals to a trickle and keeps residents away from public areas.
Carrie Lam, the Chinese-ruled city’s leader, has already proposed measures worth HK$30 billion ($3.85 billion) to help small and medium-sized companies and low-income households cope with the health crisis.
The budget is being presented by Financial Secretary Paul Chan on Wednesday. DEFICIT * Government forecast 2019-20 budget deficit of HK$37.8 billion * Government expects fiscal deficit for next year will be HK$139.1 billion, accounting for 4.8% of GDP * Government says in four financial years from 2021-2022, the overall deficit in consolidated account will range from HK$7.4 billion to HK$17 billion
ECONOMY * 2019 GDP -1.2% * 2019 Q4 GDP -2.9% on year * 2019 Q4 GDP -0.3% from Q3 * Govt forecasts 2020 GDP growth between -1.5% and +0.5% * Average GDP growth forecast at 2.8% per annum in real terms from 2021-2024 * Expects 2020 headline inflation at +1.7% * Forecasts 2020 underlying inflation at +2.5% * Says medium-term economic outlook of Hong Kong remains positive
RELIEF MEASURES * To implement counter-cyclical measures involving HK$120 billion * Government will provide guarantee of up to HK$20 billion under concessionary low-interest loans to support smaller firms
PROFITS TAX * To reduce profits tax for the year of assessment 2019/20 by 100%, subject to a ceiling of HK$20,000 * This will benefit 141,000 taxpayers, and reduce government revenue by HK$2 billion * To waive rates for non-domestic properties for four quarters of 2020-21 * To waive the business registration fees for 2020-21, benefiting 1.5 million business operators * To waive the registration fees for all annual returns for two years, benefiting 1.4 million companies * To provide a one-off special allowance to 200,000 eligible low-income households under the anti-epidemic fund
SALARY * To remove salaries tax under personal assessment for the year of assessment 2019/20, capped at HK$20,000 * It will benefit 1.95 million taxpayers and reduce government revenue by HK$18.8 billion * To waive rates in respect of residential properties for four quarters CASH PAYOUT * Says to disburse HK$10,000 to Hong Kong permanent residents aged 18 or above to boost consumption and relieve burden * The measure will cost HK$71 billion in expenses and will benefit seven million people
HEALTH CARE * To provide sufficient financial support for the Hospital Authority and the Department of Health in combating the epidemic * Says a recurrent funding of HK$75 billion will be provided to the Hospital Authority in 2020-21, up 35% over the provision of HK$55.6 billion in 2017-18
SUPPORTIVE MEASURES FOR INDUSTRIES * Proposes to waive the stamp duty on stock transfers paid by Exchange Traded Fund (ETF) market makers in the course of creating and redeeming ETF units listed in Hong Kong * The initiative will reduce transaction cost of ETFs listed and spur the development of the ETF market in Hong Kong * Plans to issue green bonds totalling HK$66 billion within the next five years to develop Hong Kong as a green hub * Plans issuance of not less than HK$13 billion worth of Silver Bonds for Hong Kong residents aged 65 or above, and inflation-linked retail bonds * Says profits tax will be halved for eligible insurance businesses including marine insurance, and government will explore tax measures to attract more global shipping business operators to set up operations in Hong Kong * To set aside an additional HK$700 million for the Hong Kong Tourism Board to revive tourism industry * To earmark HK$450 million for Department of Justice to strengthen community’s understanding of the concept of rule of law HOUSING * Estimated public housing production for the next 5 years is 100,400 units, including 74,400 units for public rental housing * Private sector will complete 19,600 residential units annually in the next 5 years, up 25 percent from the past 5 years * The 2020-21 Land Sale Programme comprises 15 residential sites, capable of providing 7,500 residential units * Together with other development and redevelopment projects, the land supply for the whole year can provide 15,700 units
REVISED ESTIMATES FOR 2019-20 * The 2019-20 revised estimates on government revenue is HK$567.3 billion, 9.4% lower than the original estimate amid lower revenues from profits tax, salaries tax and stamp duties * Revenues from profits tax and salaries tax dropped by HK$40.4 billion, stamp duty revenue is HK$13 billion less than the estimate * Government expenditure, the revised estimate is HK611.4 billion, 0.6% higher than estimate * Deficit of HK$$37.8 billion forecast for 2019-20
ESTIMATES for 2020-21 * Fiscal reserves are expected to be HK$1,133.1 billion by end March 2020 * Total government revenue for 2020-21 is estimated at HK$572.5 billion * Land revenue is estimated to be HK$118 billion, down 16.6% compared with the revised estimate for 2019-20 * Revenue from stamp duties is estimated at HK$75 billion, up 19% compared with the revised estimate for 2019-20 * Operating expenditure will increase by 16.9% * Public expenditure to account for 23.2% of GDP during the five-year period up to 2024-25 * Fiscal reserves are estimated at HK$937.1 billion by the end of March 2025, or 26.5% of GDP, equivalent to 15 months of government expenditure COMMENTS * “I consider that, with ample fiscal reserves, the government has to increase public expenditure amid an economic downturn to stimulate the economy and ride out the difficult times with members of the public.” * “The HKSAR government runs a fiscal deficit in 2019-20, the first time for Hong Kong over the past 15 years. I forecast a deficit for the next five years as well.” * “We need to maintain the growth and vibrancy of our economy and identify new areas of economic growth, with a view to increasing our revenue, promoting social development, coping with the challenges arising from an ageing population, and providing more quality employment opportunities.” * “We may need to consider seeking new revenue sources or revising tax rates. The one-off relief measures may also have to be progressively reduced.” * “Hong Kong has been intensely affected by the profound changes in the international political and economic landscape. Meanwhile, we had an extraordinary year with the occurrence of local social incidents.” * “Social unrest and turbulence have revealed deep-seated conflicts in our community, which cannot be resolved overnight. We need to address these conflicts patiently and carefully as they have a far-reaching impact on the stability and development of Hong Kong in the future.”
Reporting by Donny Kwok; Editing by Sam Holmes and Jacqueline Wong