Worldwide fiscal stimulus - Hong Kong - Ernst & Young - Global

Hong Kong

Overview of measures to reinvigorate the economy

Perhaps because Hong Kong’s current economic conditions and retail consumption are not that weak relative to other countries, stimulating short-term immediate consumption does not appear to have been an urgent task for the financial secretary in the current year’s budget, which was released on 25 February 2009. Instead, the budget focused on sustaining the economy over the next few years so as to protect and create employment.

The few short-term measures announced in the budget do not appear to deliver an immediate boost to consumption. At the earliest, the 2008-09 salaries tax rebates of 50% (capped at HK$6,000) will benefit taxpayers at the end of 2009 when their final 2008-09 assessment is issued. By comparison, the waiver of rates for the first two quarters of 2009-10 should provide some immediate relief.

However, following the release of the much worse-than- expected economic data of Hong Kong for the first quarter of 2009, the financial secretary announced on 26 May 2009 additional relief measures, including extending the waiver of rates from two to four quarters of 2009-10, increasing the 2008-09 salaries tax rebates from 50% to 100% capped at HK$8,000, and waiving the annual business registration fees for all businesses and the licence fees for certain industries for one year. These combined relief measures include the following:

Company tax measures (other)

Government rates are waived for the all of the four quarters of 2009-10, capped at HK$1,500 per quarter for each rateable tenement.

Other measures

Business registration and licence fees: waiver of the annual business registration fees for all businesses and the licence fees for transport, tourism, and catering and entertainment enterprises for one year.

Loan guarantee for small and medium-sized enterprises: enhancing the existing Special Loan Guarantee Scheme for small and medium-sized enterprises by increasing the proportion of the government’s guarantee for loans granted by financial institutions under the scheme from 70% to 80% and the ceiling from HK$6,000,000 to HK$12,000,000.

Government property: a 20% rent reduction is introduced for a period of six months for most government properties and short-term tenancies of government land.

Level-playing field for Islamic finance: tax legislative amendments are proposed to mitigate the additional tax costs associated with Islamic finance.

Local bond market: issuance of government bonds are considered to promote the development of the local bond market.

Exchange of information: legislative proposals liberalize the exchange of information clause included in international tax agreements.

Tax measures affecting individuals

A one-off tax rebate of 100% of salaries tax and tax under personal assessment for 2008-09, capped at HK$8,000.
 
Waiver of two-month rents for public housing tenants and an extra month’s payment for social welfare, disability and old-aged allowances recipients.

An extension of the freeze on government fees and charges related to people’s livelihoods through to 31 March 2010.

Tax rate changes

Customs and duty

To increase tobacco duty by 50% with immediate effect.