EY’s comments on Budget 2018-19
Hong Kong, 1 March 2018
Agnes Chan, Managing Partner, Hong Kong and Macau at EY, says: “Based on the revised estimates announced in yesterday’s budget, the government will record a surplus of HK$138 billion for the financial year 2017-18, thereby propelling Hong Kong’s fiscal reserves to HK$1,092 billion by the end of 31 March 2018. With such an enviable level of fiscal reserves, the Financial Secretary has rightly handed out an array of one-off relief measures totaling HK$51.6 billion. The proposed measures would help alleviate the tax burden of individuals and enterprises and help those within the social security net to better face the uncertainties ahead.”
Reducing the tax burden of individuals
Robin Choi, People Advisory Services Partner at Ernst & Young Tax Services Limited, says that: “We welcome the various proposals to reduce the tax burden on salary earners, such as widening the tax bands, lowering the marginal tax rates, increasing various allowances and introducing a personal disability allowance. We are also glad that the Financial Secretary accepted our proposal for introducing a tax deduction for taxpayers who purchase eligible health insurance products. These measures would help to ease the tax burden of individuals.”
Robin Choi adds: “In view that taxpayers nowadays often engage their parents to look after their children, we hope that the Financial Secretary will, at an appropriate time in the future, also consider adopting our proposal for granting a grandparent caretaker allowance to working parents. Our proposal is to grant an allowance of HK$20,000 to an eligible taxpayer in respect of one of his/her parents or parents-in-law who is not employed and is looking after any children of the taxpayer who are 12 years old or younger in the relevant year of assessment. We believe that this proposed measure would encourage more women to stay in the workforce after having their children and help to improve cross-generational bonding.”
75% reduction in salaries tax and tax under personal assessment, with a HK$30,000 cap
Robin Choi says: “The proposed 75% reduction for the 2017-18 final tax capped at HK$30,000 is a targeted approach primarily intended to benefit middle lower income earners.”
Driving a vibrant and innovative economy
Paul Ho, Financial Services Tax and Business Advisory Services Partner at Ernst & Young Tax Services Limited, says: “The proposed introduction of super tax deductions for expenditure on qualifying research and development (R&D) will be welcomed by many companies, especially those that are currently paying taxes. In addition, we hope that the Financial Secretary, when finalizing the legislation for the proposal, will also consider granting taxpayers an option to convert their super tax deductions into a cash subsidy or refundable tax credit. Such an option would in particular encourage enterprises not currently making profits to continue undertaking R&D activities.”
Further developing Hong Kong’s bond markets
Paul Ho says: “EY welcomes the Financial Secretary’s proposal in the budget to further enhance the Qualifying Debt Instrument (QDI) scheme by extending the scope of exemption to include debt securities listed on the Stock Exchange of Hong Kong and to QDIs of any duration rather than the current requirement of not less than seven-year term of maturity. We believe that this proposal will help further develop the bond market of Hong Kong.”
75% reduction in profits tax, with a HK$30,000 cap
Paul Ho adds: “The proposed 75% profits tax reduction capped at HK$30,000 would be most welcomed by SMEs in terms of easing cash-flow pressures and coping with the rising costs of doing business.”
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This press release is issued by the EY China practice, a part of the Ernst & Young global network.