Financial Secretary Unveils Tax Cuts, Concessions in 2008-2009 Budget
Financial Secretary John C. Tsang attends a press conference on the 2008-2009 Budget
On February 27, Financial Secretary John C. Tsang unveiled a package of initiatives and concessions to help the disadvantaged, enhance Hong Kong's competitiveness and ensure sustainable development.
Delivering his maiden budget to the Legislative Council, Mr. Tsang commented that three principles guided him in the formulation of the budget: the government's commitment to society, sustainable financial policies, and pragmatic decision-making.
"I hope that this budget will lessen people's burden and help them handle their various challenges," Mr. Tsang told members of the Legislative Council.
The Financial Secretary forecast a record budget surplus in the Consolidated Account of US$14.8 billion and a surplus of US$8.2 billion in the Operating Account for 2007-08.
He proposed a variety of measures to return wealth to the people, including a one-off tax reduction of 75 percent of salaries tax and tax under personal assessment for the 2007-08 fiscal year, up to a maximum of US$3,205.
The standard rate of salaries tax and personal assessment tax will be lowered by one percentage point from 16 percent to 15 percent from the next fiscal year. Profits tax will be lowered from 17.5 percent to 16.5 percent.
Small and medium-sized businesses are also in line for a one-off tax reduction with the Financial Secretary proposing a concession of 75 percent of profits tax for 2007-08, up to a maximum of US$3,205. The proposal will benefit all 100,000 companies liable to profits tax.
It was also proposed that business registration fees be waived for 2008-09 and the hotel accommodation tax be reduced to 0%.
With regard to Hong Kong's commitment to society, Mr. Tsang said it was the duty of the government to provide the final safety net for the disadvantaged. As such, he announced various measures to assist low-income families and the elderly.
The Financial Secretary placed healthcare reform as a priority in achieving fiscal sustainability, adding that an aging population posed a challenge for the city which he said would be home to some 2.17 million elderly people by 2033.
He also announced plans to enhance existing measures and introduce new initiatives to help ethnic minorities and new arrivals.
Mr. Tsang said the research and development sector was a key area for promoting high value-added economic activities. He proposed a one-off grant of US$2.3 billion to set up a Research Endowment Fund to replace the existing annual funding grant to the Research Grant Council of the University Grants Committee.
Additionally, he proposed providing 800 additional publicly-funded places for postgraduate research programs in phases starting from the 2009-10 school year.
On the environment, Mr. Tsang proposed a reduction of 30, 50 or 100 percent in the First Registration Tax of commercial vehicles meeting Euro V emissions standards.
To encourage businesses to use cleaner production techniques, Mr. Tsang also proposed a 100 percent profits tax deduction for capital expenditure on environment-friendly machinery and equipment in the first year of purchase.
Duties on wine, beer and all other alcoholic beverages except spirits will be exempt to help promote Hong Kong as a trade and distribution center for quality wine in Asia.
Mr. Tsang said that by developing various businesses in Hong Kong relating to quality table wine, it was expected that total business volume in the trade, storage and auction of table wine may increase by as much as US$513 million.
The Financial Secretary predicted that the operating surplus would build up to US$8.6 billion in 2012-13.
Mr. Tsang stated that the measures proposed in the budget, which are in line with the principle of sustainability, were mostly one-off or time-limited.
Mr. Tsang was optimistic about Hong Kong's economic prospects over the medium term. He forecast that the economy would continue to record solid growth in 2008, with GDP to be around 4 percent to 5 percent.
2008-2009 Budget: http://www.budget.gov.hk/
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