Will Hong Kong government get more tax revenue next year?

May 03, 2023 11:04
Photo: HK Government

Bad news is tax season is coming.

Worse, the Hong Kong SAR government expects a five per cent drop in tax revenue in the financial year ended 31 March 2023, raising fear that we might need to pay more taxes – somehow.

Underlying the worry was a drop of 330,000 in the number of taxpayers to around 2.4 million, marking the third consecutive year of decline.

Some 150,000 citizens left Hong Kong in the last two years was the main reason, and so was the poor economy that pushed the unemployed and lower income groups out of the tax net.

Inland Revenue Commissioner Tam Tai-pang estimated total tax revenue in the year 2022/3 would be HK$360.2 billion, down five per cent, mainly due to a 30 per cent drop in property tax income.

Although the Commissioner stopped short of painting a brighter picture this year, things might not be that bad at all.

First quarter GDP in Hong Kong was up 2.7 per cent, ending four consecutive quarters of contraction thanks to the surge in private consumption after the reopening of the border. The second quarter is expected to be even better, according to Chief Executive John Lee.

Look at HSBC, which has announced a first-quarter pre-tax profit of US$12.9 billion, a triple of the level in the same period last year. The bank also resumed quarterly dividends for the first time since 2019.

Even Cafe de Coral, the largest local fast-food chain and a good economic barometer, said yesterday its net profit would surge more than five-fold to HK$115 million as the economy rebounded from a low base last year.

Should this positive trend continue, the corporate tax and individual tax will see a strong rebound, possibly mitigating the effect of the continuous exodus.

Home prices in Hong Kong rebounded five per cent in the first quarter after a 15 per cent price drop, according to government estimates. Transaction volume also picked up for new homes such as Sun Hung Kai Properties’ University Hill in Tai Po, which is expected to be cleared out by young buyers.

Hong Kong has a good start, and barring another black swan, there should be little worry from the Inland Revenue.

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EJ Insight writer