Agnes Chan, EY Managing Partner, Hong Kong and Macau, says, “Based on the revised estimate announced in the Hong Kong Budget, the HKSAR Government (the Government) will record an unprecedented deficit of HK$258 billion for the financial year 2020-21, the highest deficit recorded to date.”
In the context of the pandemic plunging both the Hong Kong and global economies, the Financial Secretary (FS) struck a reasonably good balance in his budget announced. Among the one-off relief measures, the FS has taken up EY proposal and announced for the first time the issuance of electronic consumption vouchers – in instalments with a total value of HK$5,000 – to each eligible Hong Kong permanent resident and new arrival aged 18 or above to boost domestic consumption. This one-off measure would stimulate the Hong Kong economy dampened by the pandemic and benefit both our people and local businesses.
“Although the electronic consumption vouchers will involve HK$36 billion, it is an exceptional one-off measure taken in light of the current special circumstances and therefore should not impose a burden on Hong Kong’s long-term fiscal position. By encouraging local consumption, this measure is expected to facilitate the development of a digital economy and bring about an estimated over 1% GDP growth. In fact, similar measures introduced in other locations such as Taiwan and Macau have brought positive impact to those economies,” added Chan.
Paul Ho, Financial Services Tax and Business Advisory Services Partner at Ernst & Young Tax Services Limited says, “The proposed increase in stamp duty on stock transfers from 0.1% to 0.13% is relatively mild and should be acceptable, given the Government has very limited room to introduce new taxes or revise profits tax and/or salaries tax rates in these challenging times. Such increase should not have a long-term impact to the competitiveness of the HK stock market because the rate could be adjusted according to the market conditions and overall economic environment.”
Supporting the Greater Bay Area’s development and consolidating Hong Kong’s competitiveness as an international financial center
Further integration with the GBA will provide new impetus for Hong Kong’s economy and family office development, it is also an area that Hong Kong is well-placed to leverage. “We welcome the FS’s announcement that, in order to attract more family offices to set up in Hong Kong, one-stop support services will be offered to family offices interested in establishing a presence in Hong Kong and that a review of the tax arrangements pertaining to family offices will be carried out. This move will definitely enhance HK’s position as a regional hub for family offices, especially in the context of the broader GBA initiative,” Ho comments.
“’With the two new onshore investment fund regimes now available – Open-ended Fund Company (OFC) and Limited Partnership Fund (LPF), we are delighted to see the proposal that will allow foreign investment funds to re-domicile to Hong Kong under the OFC and LPF regimes. Also, it is a great news to the industry that the Government will provide subsidies to cover 70% (capped at HK$1 million per OFC) of the expenses paid for local professional services for OFCs set up in or re-domiciled to Hong Kong in the coming three years. We are confident that by implementing these measures, more asset managers will select Hong Kong as the preferred location for domiciliation of their funds and Hong Kong will further strengthen its position as an international asset and wealth management centre.”
Ho further expresses that EY welcomes the Government’s plan to provide subsidies (70% of expenses paid for local professional services, capped at HK$8 million per REIT) to qualifying REITs listed in Hong Kong in the coming three years to encourage the listing of more REITs in Hong Kong. This measure is in line with EY’s suggested policy direction of promoting REITs in Hong Kong. Meanwhile, the FS can also consider additional measures (such as stamp duty exemption and/or property tax exemption) in the future to further develop the REIT market in Hong Kong.
Supporting our people and households
Robin Choi, People Advisory Services Partner at Ernst & Young Tax Services Limited, says, “Although the proposed reduction for the 2020-21 final salaries tax capped at HK$10,000 is less than last year, this relief measure will still benefit middle- and lower-income earners.”
Notes to Editors
EY is a global leader in assurance, tax, strategy, transaction and consulting services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. For more information about our organization, please visit ey.com.
This press release has been issued by Ernst & Young, China, a part of the global network of Ernst & Young firms.