Hong Kong 2019-20 Budget Insights
Reduced sweeteners in a health-conscious budget
With an eye on Hong Kong’s fiscal health, the Financial Secretary’s 2019-20 budget included significantly less of the sweeteners that have become an expected ingredient of any budget recipe. However, the fact that the annual budget surplus has reduced by two thirds, but the ceiling of the salaries and profits rebates has only reduced by one-third, might make it easier for taxpayers to swallow this medicine.
In tandem with Hong Kong’s fiscal health, the Financial Secretary has clearly diagnosed that Hong Kong’s public health is in need of attention. The 10.9% increase in recurrent government expenditure on public healthcare to HK$80.6 billion, the HK$700 million additional recurrent funding to increase the allowances for medical staff and allied health professional posts, and the encouragement given to health sector employment generally are welcomed. Equally welcome is the additional HK$5 billion earmarked for the Hospital Authority to acquire and upgrade medical equipment and the creation of a public healthcare stabilization fund in the sum of HK$10 billion to fund the Hospital Authority in case of unexpected circumstances. All these actions lend credence to the importance which the HKSAR Government places on Hong Kong’s public healthcare system, a system which has been hard pressed by the recent influenza outbreak.
The creation of a stabilization fund for health issues, whilst justifiable and a due reflection of the HKSAR Government’s concern on matters of public health, may cause commentators to compare the same with today’s decision by the Financial Secretary to transfer the Housing Reserve back to the overall fiscal reserves. Some may query whether it is the view of the HKSAR Government that taking back part of the Fanling golf course, coupled with its Lantau Tomorrow Vision, is a sufficient demonstration of its commitment of resources towards public housing such that there is no longer a need for a dedicated fund account. Any such view however, may not be shared by all.
Also perhaps unclear is how the recent instances affecting the reputation of the construction industry in Hong Kong will be addressed by way of the somewhat ad hoc items announced by the Financial Secretary in today’s budget. It is perhaps unclear how the re-naming of the Project Cost Management Office as the Project Strategy and Governance Office, and the creation of courses aimed at equipping public officers with more innovative minds and enhanced leadership skills, will fix such instances. Whilst a budget speech is perhaps not a vehicle in which to announce specific steps as regards corporate governance, an announcement of an amount specifically assigned to a taskforce charged with improving corporate governance of the construction industry would have been welcomed by a public badly rattled by the recent instances in this area.
A further area where the Financial Secretary could have provided additional comment is the large amount of funds earmarked to promote research and development, technology and innovation. Whilst it is laudable for the HKSAR Government to have already incurred considerable expense in this area, and to have earmarked the further expenditure announced by the Financial Secretary in today’s budget speech, some commentators may have hoped for guidance on the internal performance measures the HKSAR Government will apply in assessing whether taxpayers are receiving the best bang for their buck.
More clear in today’s budget was the Financial Secretary’s desire to diversify Hong Kong’s economy away from the so-called “four pillar” service industries of financial services, tourism, logistics and professional business services. In addition to today’s announcement of increased expenditure on research and development, the Financial Secretary’s commitment to diversify through developing technology infrastructure, smart production activities and high-end manufacturing industries, together with increased spending on creative industries, is welcomed.
Also welcome is today’s announcement that the Financial Secretary will move the Tax Policy Unit, currently under the Financial Services and Treasury Bureau, to directly under his office, and that additional resources will be made available to the Unit as necessary. It is hoped that this move will herald a more proactive and timely assessment of tax policy and the implementation of changes where necessary.
In conclusion, the Financial Secretary’s health-conscious budget, with less sweeteners and increased expenditure on public health, together with a greater diversification of Hong Kong’s economy, may be good medicine for Hong Kong.
Our Budget Insights summarizes the key proposals contained in the budget and our views thereof.
- Further strengthening the asset management industry of Hong Kong
- Possible introduction of tax incentives for regional headquarters based in Hong Kong
- Proposed tax incentives for high value-added maritime services
- Tax incentives for research and development (R&D) expenditure can be further enhanced
- Key budget assumptions, budgetary criteria and projections