HK's Financial Secretary Unveils Tax Cuts And Concessions In Budget

by Mary Swire, for LawAndTax-News.com, Hong Kong

28 February 2008

In his first Budget, Financial Secretary John Tsang forecast a record $115.6bn surplus, and proposed a basket of measures aimed at returning wealth to the people.

"I hope that this Budget will lessen people's burden and help them handle their various challenges," Mr Tsang told the Legislative Council as he delivered his Budget.

His package of initiatives and concessions aim to help the disadvantaged, enhance Hong Kong's competitiveness and ensure sustainable development. Mr Tsang has forecast a surplus in the Consolidated Account of $115.6bn and a surplus of $63.7bn in the Operating Account for 2007-08.

To return the wealth to the people, he proposed a one-off tax reduction of 75% of salaries tax and tax under personal assessment for the 2007-08 fiscal year, up to a maximum of $25,000. Around 1 million taxpayers would pay no more than $5,000 in tax after the reduction.

The move would cost the Government $12.4 billion in 2008-09, and benefit 1.4 million taxpayers, he explained.

Tsang also proposed raising the basic allowance and the single parent allowance from $100,000 to $108,000, and increasing the married person's allowance from $200,000 to $216,000.

"Upon implementation of the proposals, all the major allowances and tax rates will have reverted to their 2002-03 levels," Mr Tsang stated.

The Financial Secretary further announced that he would like to lower the salaries tax and personal assessment tax standard rate by one percentage point, to 15%, from the next fiscal year, and lower profits tax to 16.5%. Tsang also proposed widening the tax bands from $35,000 to $40,000.

Small and medium businesses are also in line for a one-off tax reduction, with a proposed 75% concession of profits tax for 2007-08, up to a maximum of $25,000. Business registration fees will also be waived for 2008-09.

To help lower-paid people, Mr Tsang proposed a $6,000 one-off injection into Mandatory Provident Fund accounts of those employees and self-employed people earning no more than $10,000 a month.

Tsang has also proposed to waive rates for 2008-09, subject to a ceiling of $5,000 per quarter for each rateable tenement. It is estimated that 99% of domestic properties and 85% of non-domestic properties will not be subject to rates in the year.

"The impact of these measures will be felt in the medium to long term and will not have any short-term economic impact," Mr Tsang explained.