Hong Kong Budget Could Be Balanced 3 Years Early

by Mary Swire, Tax-News.com, Hong Kong

19 January 2005

The Hong Kong government could achieve a balanced budget by 2005/2006 if the current levels of economic growth are maintained, experts have forecast.

According to accounting firm PricewaterhouseCoopers, for the current fiscal year, which ends in March, the government is likely to post an overall surplus in excess of HK$11 billion, a much improved picture compared to its original estimate of a HK$42.6 billion deficit, Dow Jones reported.

However, PwC estimates that Hong Kong will likely remain in deficit in its operating account due to the predominance of one-off revenue raisers such as the recent bond issue and the selling off of government-held land.

Nevertheless, if economic growth, which is estimated at 7.5% for 2004 is sustained, PwC believes the government may have a balanced budget by 2005/2006 – three years ahead of the target set by Financial Secretary Henry Tang.

In order to help shore up Hong Kong’s fiscal position, Tang is to announce details of a sales tax in the forthcoming budget. However, Tim Lui, a tax services partner at PwC noted that the government’s current policies appear to be operating effectively without the need for considerable fiscal tightening.

"Given the figures as we see them, this approach seems to be working," he observed.

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