Budget also raised new taxes on equity trading and private car registration fees
The Hong Kong Government last week announced its 2021-22 Budget, with the Financial Secretary Paul Chan Mo-Po outlining steps towards supporting those made unemployed due to the COVID-19 pandemic and supporting local business.
Here are four standout areas from the latest Hong Kong Budget:
Business support
The Government set aside HK$9.5 billion in relief for businesses and either continued or introduced new support measures. These include extending the application period for a 100% guarantee low-interest loan for enterprises to the end of 2021, raising the loan ceiling to $6 million and extending the repayment period. Profits tax for Hong Kong companies was reduced by 100% subject to a $10,000 ceiling for the 2020-21 assessment year. Business registration fees were waived, and 75% of water and sewage charges of non-domestic households for 8 months was continued, as was a 75% rental/fee concession for eligible Government properties/short-term tenancies and waivers for 6 months.
New taxes
Following an estimated deficit of $257.6 billion for the 2020-21 financial year, the Government promised to reduce growth in civil service establishment to zero and cut Government recurrent expenditure by 1% in 2022-23, measures that are expected to save $3.9 billion. Furthermore, the Budget introduced a number of new taxes. Revenue raising measures include raising the Stamp Duty on stock transfers from the current 0.1% to 0.13% and increasing the rate of each tax band for the first registration tax for private cars (including electric private cars) by 15% and the vehicle licence fee by 30%. No other new taxes, or tax increases, were announced.
Stimulating the economy
Measures to support businesses following the pandemic and drive economic growth were also introduced. These included a $5,000 electronic consumption voucher for permanent residents and new arrivals aged 18 above, designed to boost retail spending, a sector hit hard by the pandemic. A $1.5 billion Dedicated Fund on Branding, Upgrading and Domestic Sales was introduced to help local companies expand overseas, and $765 million was earmarked to support Hong Kong Tourism Board (HKTB) in reviving the tourism industry. Other measures were also included to help promote the ones hit hard by the pandemic including offer of guaranteed personal loan to the unemployed up to ceiling of $80,000.
Sector-specific support
The budget outlined a number of sector-specific support measures. $175.5 billion in green bonds will be issued in the next five years, as well as $24 billion in Silver Bonds and no less than $15 billion of iBonds this year. Measures were introduced to support the listing of real estate investment trusts (REITs) in the form of a subsidy as well as a subsidy for Open-ended Fund Companies to set up in or re-domicile to Hong Kong. $9.5 billion will be pumped into the Innovation and Technology Fund and $1 billion into the CreateSmart Initiative, among other measures.
The Government forecasts a return to growth in 2021 with a 3.5-5.5% GDP growth and an annual economic growth of 3.3% per annum on average per year between 2022 and 2025. However, these estimates are not guaranteed and much could go wrong, both internally and externally, that could derail these forecasts. As such, the 2021 Budget, while not as expansive as last year’s, is designed to provide continued support to businesses as well as take steps to raise funds.
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