Date
17 February 2018
Ernst & Young is forecasting the Hong Kong government's consolidated surplus for the 2017-18 fiscal year to reach HK$160 billion. Photo: RTHK
Ernst & Young is forecasting the Hong Kong government's consolidated surplus for the 2017-18 fiscal year to reach HK$160 billion. Photo: RTHK

Huge surplus should help HK plan further tech sector boost: EY

The Hong Kong government’s consolidated surplus for the 2017-18 fiscal year is likely to come in at HK$160 billion, roughly ten times larger than the figure laid down by authorities in their original estimate, according to global accounting and business services firm Ernst & Young (EY).

The government will enjoy a decade-high surplus as revenue is boosted due to high land prices and the booming property and stock markets, EY said on Wednesday.

The huge surplus should give the government ammunition to introduce more tax incentives catering for high-new technology and creative industries and startups, fostering new growth drivers for the economy, it said.

Hong Kong’s fiscal reserves are expected to exceed HK$1.1 trillion by March 31, amounting to 43.1 percent of the city’s gross domestic product (GDP).

“A number of land lots at prime locations were sold last year at record prices, boosting the land premiums to reach HK$196 billion, and the vibrant property and stock markets are expected to contribute HK$81 billion of stamp-duty revenue,” said Agnes Chan Sui-kuen, managing partner for Hong Kong and Macau at EY.

EY supports a proposal to provide a super tax deduction of 200 percent for qualifying research and development expenditures, and also recommends that authorities give taxpayers an option to monetize the tax reductions.

In addition, EY said it favors the introduction of a profits tax concession for high-new technology and creative startups, with income tax relief to attract angel investors.

The firm believes that with the deep reserves, the government is in a position to look at strategic and long-term policies to grow the economy.

Among other proposals, EY said the government should consider waiving stamp duties for Hong Kong permanent residents in respect of first-time purchase of their principal homes costing up to HK$6 million.

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BN/RC

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