GOVT FORECASTS $56.3B DEFICIT

(To watch the 2022-23 Budget speech with sign language interpretation, click here.)

In striving to maintain healthy public finance, the Government has to identify new areas of growth to increase revenue and in doing so, the people’s livelihood will not be compromised.

Financial Secretary Paul Chan made the statement when delivering the Budget speech today, noting that 2022-23 will see a $56.3 billion deficit due to expenses for one-off relief measures and anti-epidemic measures.

“Having regard to the current economic situation, I believe that this is still not the appropriate time to revise the rates of profits tax and salaries tax, which are our major sources of revenue.”

Rating system revision

Instead, Mr Chan proposed a progressive rating system for domestic properties to reflect the affordable users pay principle.

For domestic properties with rateable value of $550,000 or below, the rates levied will be maintained at 5% of the rateable value.

For domestic properties with rateable value over $550,000, the Budget proposes that rates be charged at 5% of the rateable value on the first $550,000 and at 8% of the rateable value on the next $250,000, then at 12% on rateable value exceeding $800,000.

The Financial Secretary expected that about 42,000 domestic properties will be affected with an increase of about $760 million in government revenue each year.

Legislative initiative

The Government also plans to submit a proposal to the Legislative Council in the second half of this year to implement the global minimum tax rate and other relevant requirements in accordance with the international consensus.

It will concurrently consider introducing a domestic minimum top-up tax with regard to multinational enterprises starting from the 2024-25 year of assessment to ensure their effective tax rates reach the global minimum effective tax rate of 15% so as to safeguard Hong Kong’s taxing rights.

“Based on our rough estimates, the domestic minimum top-up tax will involve an amount of about $15 billion per year,” Mr Chan said.

Revised estimates

The 2021-22 revised estimate on government revenue is $682.7 billion, mainly due to higher-than-expected revenues from land premium and profits tax.

Expenditure is $699 billion, 4% lower than the original estimate, mainly because the operating expenditure is $18.8 billion lower than the estimate.

“All in all, I forecast a surplus of $18.9 billion for 2021-22. Fiscal reserves are expected to be $946.7 billion by March 31, 2022,” Mr Chan said.

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