In the past few days there has been media coverage of the proposal to suspend provisional tax and to introduce a one year subsidy of HK$2,000 per month for those persons hiring graduates from Hong Kong universities. Sadly, I doubt whether there is time to introduce additional proposals into next Wednesday’s Hong Kong Budget but, even if there was such measures, however well intentioned, would not help solve SME’s immediate cash flow problems.
Provisional tax is payable on current year’s profits but is based on the previous year’s final tax assessment. If a taxpayer is able to demonstrate that its profits for the current year are likely to be less than 90% of the provisional tax assessed a claim can be made to holdover the provisional tax assessed. Hence, persons who are liable to provisional tax are only those earning profits. Hopefully, the collection of revenue from this source will be used to fund other worthwhile proposals to be made by the Honorable John Tsang.
Everybody would like to see our University graduates fully employed and the proposal to subsidize their remuneration is admirable. However, SME’s who are currently struggling every month to meet their salary bills would greatly appreciate this subsidy being extended to their current workforce. Unless a company can afford to hire new staff it will not be in a position to take advantage of this proposal.
As I mentioned last week SME’s sincerely hope that the Budget will include measures that can ease their cash flow problems. The ability to carry back tax losses, a subsidy for their monthly salary bills, perhaps based on persons registered for the MPF, and a reduction in corporate tax rates will certainly help.
I agree that this may necessitate the Government dipping into their reserves but a substantial proportion of these have been derived from the taxation of corporate profits and business transactions.
