Tax Increases Inevitable In SAR Budget, Report Suggests

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

24 February 2003

Tax hikes are almost inevitable in Hong Kong Finance Minister, Antony Leung Kam-chung's March 5 budget, according to a Reuters report.

The news service revealed that analysts expect Mr Leung to announce modest increases in corporate and personal income taxes, and to cut personal allowances in order to widen the scope of the tax net. However, these moves are unlikely to prove popular with the jurisdiction's residents.

Speaking to Reuters last week, Choy Kin Shing, a senior researcher at the Social and Economic Policy Institute explained that: 'More lower income people will have to pay taxes, and this would not be a good move given our already large inequality of wealth.'

A recent study commissioned by Ernst & Young also revealed that around half of Hong Kong's population are opposed to a 1% increase in personal income taxes, or cut in personal allowances. However, more than 70% of those questioned said that they would be in favour of a modest increase in corporate tax levels.

Despite public opposition to such moves, however, economists have argued that an 1% increase in personal and corporate taxes is unlikely to seriously dent the SAR's attractiveness to foreign investors.

'An extra 1% or 2% in taxes would not be a concern if companies are making strong profits,' Henry Tsoi. senior economist at Hang Seng Bank in Hong Kong, observed.

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