Michael Chugani wrote in this morning South China Morning Post that Hong Kong should not pin its hopes on a daring budget. Perhaps this was why that it was not until after an hour and forty odd minutes through his 2010-11 budget speech that John Tsang announced that he now forecasted a budget surplus for 2009-10 in the sum of $13-8bn as opposed to the original estimate of a $39.9bn deficit.
As expected the leaked “one off” giveaways proved to be correct i.e. the Government will;
- Pay two months rent on behalf of public housing tenants,
- provide an additional one month of CSSA payment, old age allowance and disability allowance,
- waive rates for 2010-11, subject to a cap of HK$1,500 per quarter
- reduce salaries tax by 75%, subject to a cap of HK$6,000
- waive the business registration fee
- provide a $1,000 allowance to students receiving CSSA or student financial assistance
Sadly, as predicted the Government has chosen to use the tax system for social engineering i.e. increasing stamp duty on property transactions valued over $20 million as a means to dampen the luxury property market, it also stated that it may increase the duty on tobacco to discourage smoking. In my view the increase in stamp duty will have no impact on the decision of most people to purchase luxury properties, however it is only sad that having made the decision to tinker with stamp duty the Government did not take this opportunity to reduce the rate of stamp duty on properties valued below HK$6 million as a means of assisting first time buyers and lower income earners. Similarly, people should be able to make up their own minds whether they wish to smoke tobacco without this sort of Government intervention.
Our hopes and aspirations for SME’s did not materialize either, no reductions in tax rates nor an agreement to carry back tax losses for a three year period. Of more significance was the fact that there was no immediate willingness to extend the Government loan guarantee schemes. However, the Financial Secretary did appear to acknowledge the inequity of not giving tax relief for capital expenditure incurred on the cost of registering trademarks, copyrights and registered designs. Perhaps the financial services industry had more clout as they were able to obtain a stamp duty concession in the trading of exchange traded funds and a profits tax concession applicable to income and gains from qualifying debt instruments.
Perhaps I should not complain too much as I am fully supportive of the measures announced to strengthen public health care and to provide additional care and financial assistance to the needy, the only doubt I have is whether these proposals have gone far enough.
Hong Kong’s fiscal reserves are budgeted to increase to $508.2 billion by 31st March 2010 dropping to $470 billion by 31st March 2015, the equivalent of 15 months of Government expenditure. The Financial Secretary’s conservative, perhaps political approach, is keeping the boat steady but, I just hope that land transactions continue to bear fruit as very little attempt is being made to stimulate entrepreneurs or encourage businesses to expand their operations in Hong Kong.
