Financial Secretary John Tsang Chun-wah on Wednesday delivered his ninth budget speech.
The top finance official has a history of vastly underestimating the city’s surplus/deficit. But he has won great public support through the years with “sugar rush” budgets laced with sweeteners.
In the 2016 budget, he revised his estimate for the 2015 fiscal-year surplus to HK$30.4 billion, which is comparable to his 2015 estimate of HK$36.8 billion. It was the first time Tsang got his estimate relatively closer to the actual figure.
Total government revenue for 2015-16 is estimated to be HK$477.6 billion. The government expects operating expenditure for 2015-16 to decline by 3.1 percent to HK$427 billion. By the end of March this year, fiscal reserves are expected to reach HK$860 billion, equivalent to 24 months of government expenditure.
In fact, constant revenue and expenditure have shown little change apart from stamp duty and direct tax revenue. Stamp duty revenue is linked with housing and stocks transactions. The real revenue has exceeded the expectation which was made amid quiet market sentiment.
I personally believe the government property tightening measures have failed to work, as the stamp duty revenue was 30 percent above estimate in last budget year.
In the meantime, the government reserves are depleting, in a sign that the city badly needs to find new source of revenue. In fact, Tsang has already hinted at expanding the tax base, through measures such as sales tax, in his last budget speech.
The city’s constant revenue has been falling in recent years as it gradually loses its competitiveness. The next generation will face huge social expenditure due to aging population and low birth rate.
Tsang has also outlined a set of measures to ease the burden of local residents, with measures like reducing salaries tax and tax under personal assessment for 2015-16 by 75 percent, subject to a ceiling of HK$20,000, providing an extra allowance to social security recipients, as well as raising allowance for married couples and those who support elderly parents or grandparents.
Also, the budget has waived one-year business registration fees, and also waived license fees for travel agents, hotels and guesthouses, restaurants and hawkers and operators with restricted food permits for one year.
And the government will set aside HK$240 million to promote Hong Kong and attract tourists through various entertainment and sports events. Local tourism companies will be waived fees for participating in overseas exhibitions.
Besides, the Travel Industry Council of Hong Kong will provide subsidy for small and medium travel agencies to help them boost their competitiveness. But it remains unclear how these measures will help stimulate the local tourism industry.
This year’s budget plan is satisfactory overall, and the government has taken long-term strategy into account. It has made several initiatives in research and development, improving transportation and smart systems, and a labor market plan.
In other initiatives, the government will earmark HK$200 billion to facilitate a 10-year hospital development program.
Tsang has also reinforced Leung Chin-ying’s Policy Address focus on ‘One Belt, One Road’ and Hong Kong’s role in the China-led Asian Infrastructure Investment Bank (AIIB). The move is aimed at opening new markets.
WY Jimmy wrote this article, which appeared in the Hong Kong Economic Journal on Feb. 26.
Translation by Julie Zhu
[Chinese version 中文版]
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