HKICPA's response to the Government's 2024-2025 Budget
The Hong Kong Institute of Certified Public Accountants (HKICPA) welcomes the 2024-2025 Budget announced by the Government. Against the background of continuing external challenges, it adopts a pragmatic and balanced approach, taking into account the needs of different sectors of society, while pursuing further economic development, and aiming to maintain a fiscally prudent stance and transparency in public finances. The Institute believes that the Budget gives further impetus to Hong Kong’s economic development, its vibrancy and attractiveness to investors and talent, as well as its status as a leading international financial centre.
The HKICPA is pleased to note that the Budget has adopted a range of measures proposed previously by the Institute, including further support for hosting mega events and activities to promote high-quality tourism, fostering digital transformation, strengthening development of the green finance ecosystem in Hong Kong, helping to restore fiscal balance through prudent financial management, enhancing the profit tax system and making enhancements to harbourfront locations.
2024-2025 Budget welcomed by the HKICPA
The Financial Secretary announced that a deficit of HK$101.6 billion is expected for 2023-2024, which is HK$25.7 billion lower than the HKICPA’s earlier estimation. The HKICPA believes that the deficit reflects the impact of multiple factors such as lower revenues from land premiums during the fiscal year, slower-than-expected economic growth, and reduced stamp duty revenue from the stock and property markets.
“We are pleased to see that a number of recommendations put forward by the Institute in our budget and other submissions have been adopted in the Budget. As Hong Kong is expected to face continuing challenges from the external environment, we hope the Government will look to build on the measures in the Budget to strengthen Hong Kong’s long-term economic development,” says Roy Leung FCPA, President of the HKICPA.
Fiscal consolidation programme for sound economic growth in long run
The Institute welcomes the fiscal consolidation programme with the aim of maintaining the sustainability of public finances, achieving fiscal balance gradually and keeping the fiscal reserves at a prudent level. The Institute believes that maintaining sustainability of public finances will be important to Hong Kong’s role as financial centre and its economic development generally. At the same time, given the pressures on the public purse and the challenges ahead, the Institute continues to suggest that that the Government explore options to widen the tax base, while ensuring that the tax regime remains attractive to investors.
The Budget has announced the issuance of $120 billion worth of bonds in 2024-25, of which $70 billion will be the retail tranche. The Institute believes that the issuance of a new round of Silver Bonds and Green Bonds will facilitate the further development of local bond market, provide additional opportunities for investors and also bring vital revenue to the Government. It is also pleasing to see that the Financial Secretary emphasized the intention not to raise debt frequently to fund recurrent expenditure, based on the principle of prudent financial management.
“We hope that the Government will explore possible new sources of revenue to ensure that Hong Kong’s public finances can meet the long-term needs of the economy and the community. It is also important to make sure that, overall, our tax regime remains fit for purpose,” says Eugene Yeung CPA, Convenor of Budget Proposals Task Force of the HKICPA.
Reinvigorate Hong Kong as a world city; attract investment and talent
In the post-COVID era, Hong Kong tourism is still on the way to full recovery. The HKICPA welcomes the fact that Government has responded to the proposal to promote higher-value-added tourism by earmarking $100 million to boost mega-event promotions over the next three years, which includes encouraging and supporting large-scale events and activities, such as international conventions, exhibitions and fireworks displays. It is believed that Hong Kong's status as a mega-event hub could be further enhanced. Also, it would further attract high-end tourists, such as business travellers and tourists coming from other parts for the world. In addition, as the Government has proposed to resume the collection of the Hotel Accommodation Tax, it is believed that the revenue could help to finance the costs of staging mega-events.
In the face of various global economic challenges, Hong Kong should enhance its international image and promote the attractiveness of its business environment to strengthen competitiveness. The Institute acknowledges the Government’s efforts to actively reach out to enterprises from the Mainland and overseas, and attract and assist strategic enterprises, high value-added technology industries and other enterprises to invest in Hong Kong, and is pleased to note the successes achieved so far.
In recent years, there have been several major international taxation developments, such as the implementation of the BEPS 2.0 initiative, impacting on Hong Kong’s taxation rules. Sarah Chan FCPA, Chair of the Taxation Faculty Executive Committee of the HKICPA, commented, “The Institute suggests the Government continue to reach out to affected companies to ensure that they have a clear understanding of how new tax laws will be implemented in Hong Kong. And, the Government should allow sufficient transition time for affected taxpayers to get prepared for these changes and adequate promotion and public education should be conducted, so as to ensure greater certainty.”
Alleviating the financial burden on citizens and promoting market transactions and development
Green finance
The Institute welcomes the various measures to promote green finance, such as formulating a roadmap for the implementation of international Sustainability Disclosure Standards. We agree that accurate disclosure of sustainability-related information is essential. Enhancing disclosure can deepen Hong Kong's green and sustainable finance development. In addition, extending the Green and Sustainable Finance Grant Scheme and expanding the scope of subsidies to cover transition bonds and loans can encourage related industries in the region to make use of Hong Kong's transition financing platform as they move towards decarbonisation.
Promoting green city development
The Institute is pleased that a range of measures to promote green city development were included in the Budget, including the extension of the "One‑for‑One Replacement" Scheme, and continuing to waive in full over the next two years the first registration tax (FRT) for other types of electric vehicles, including electric commercial vehicles, electric motorcycles and electric motor tricycles, albeit with downward adjustments in some cases . These measures can continue to encourage the wider adoption of electric vehicles and accelerate the pace of green city development. Regarding the reduction of concessions by 40 per cent for the "One‑for‑One Replacement" Scheme, the Institute views the change as acceptable given the lower prices and wider selection of electric vehicle models. However, the Institute hopes that the Government will continue to introduce more measures to encourage Hong Kong drivers to switch to electric vehicles, such as expanding the charging infrastructure, in view of the Government’s goal of ceasing to register new fuel-driven and hybrid private cars by 2035.
Cancellation of special stamp duties on property sales
The special stamp duties on property sales were originally implemented with the aim of curbing speculation and halting further price rises. At this time, while we believe there are no immediate signs of speculation in the market, the lack of market confidence, high-interest-rate environment, poor land sales and global uncertainties, are more relevant to the weakening property market. We therefore do not foresee the cancellation having any major immediate impact on the property market. However, it will send a signal to the market and may encourage more activity when the high-interest-rate environment changes and the level of confidence improves. The Government should continue to monitor the property market and review the situation.
Relief Measures
Economic repercussions of the pandemic are still felt across society, while the Government continues to face financial pressure. The HKICPA believes the decision to reduce the tax rebate from HK$6,000 in the 2023 Budget to HK$3,000 is a pragmatic decision in the present circumstances. Nonetheless, to alleviate the financial burdens of taxpayers, the Institute suggests that the Government review the provision of other tax allowances (e.g. personal basic allowances and dependent parent allowances) with reference to inflation. Allowances for new-born children can be also reviewed to encourage childbirth.
Allowances under Profits Tax
The HKICPA welcomes the decision to remove the time limit for claiming allowances for industrial and commercial buildings and structures. This measure has been advocated by Institute and is a positive step towards creating a more favourable business environment and supporting economic growth in Hong Kong.
Enhancements to harbourfront locations
The proposal to introduce commercial facilities such as food and beverages, retail and entertainment on a pilot basis at selected suitable harbourfront locations, to bring convenience and better experience to visitors also aligns with the HKICPA’s recommendations to enhance the attractiveness of these areas, and to stimulate economic activity, ultimately contributing to the overall vibrancy of Hong Kong’s tourism sector.
Roy Leung FCPA, President of HKICPA (Centre), Eugene Yeung CPA, Convenor of Budget Proposals Sub-Committee of HKICPA (Left) and Ms. Sarah Chan FCPA, Chair of Taxation Faculty Executive Committee of HKICPA(Right) attended press conference to response to Government Budget 2024-25.
