Hong Kong To Fight Downturn With HK$11.8 Billion Tax Break Package

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

24 April 2003

The government of Hong Kong has unveiled a radical economic plan aimed at reviving the territory in the wake of the SARS (Severe Acute Respiratory Syndrome) epidemic. It will contain short term government backed loans to business as well as income tax rebates and the entire package is worth some HK$11.8 billion (US$1.5 billion).

The plan, which is the equivalent of 1% of the jurisdiction's GDP, is 12 times larger than a similar proposal announced in Singapore which has also been hit by the virus.

"Our priority remains to prevent and control the disease and this must be above all the most important task we all have. However, it is necessary for us to plan for arrangements to revive our hard hit economy in the medium and long-term," Chief Executive Tung Chee-hwa told Channel News Asia adding: "The entire package of measures is a very well and thoroughly considered one. They have taken into account the medium-term needs to make sure of our budget and the possible impact of the package on the financial market."

The more prominent aspects of the plan include a tax rebate of up to US$380 on earnings for all taxpayers; a 30 to 50 per cent reduction in rents on government owned properties; and a US$450 million loan scheme in which the government is acting as guarantor.

Though the measures are expected to increase the government's growing budget deficit, politicians have stressed that restoring confidence in the territory is a much higher short term priority.

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