Hong Kong Spends on Tech, Steps Up Rebates Amid Mega Surplus
(Bloomberg) -- Hong Kong unveiled new plans to invest in technology and return funds to the public on Wednesday, as the city finds itself swimming in cash thanks to red-hot property and financial services markets.
Delivering the annual budget, Financial Secretary Paul Chan also pledged to return 40 percent of a hefty HK$138 billion ($17.6 billion) surplus to the community. The excess is well above a government projection of HK$16.3 billion made a year ago. Meanwhile, he stressed the importance of saving for bad times and repeated warnings of Hong Kong property risks.
“It’s a positive and balanced budget, and it basically covered most of the people in Hong Kong and industries,” said Jeremy Choi, tax partner with PwC, in a phone interview. The investments in research and development are encouraging, with Hong Kong starting to catch up with competitors such as Singapore, he said.
The budget comes after Hong Kong’s fastest economic growth in six years spurred calls to share more of the wealth with those in need, particularly as the city’s property market -- the world’s most expensive -- has put home ownership out of the reach of many. Chan forecasts the city to see another 3 to 4 percent expansion in 2018.
Here’s a look at the groups that will benefit -- and those left out in the cold.
- Salaried workers: Salaries tax and tax under personal assessment to be reduced by 75 percent up to a maximum of HK$30,000 for the 2017-2018 fiscal year. This will impact 1.88 million taxpayers and cut government revenue by HK$22.6 billion. The government will also widen tax bands for salaries tax to HK$50,000 from HK$45,000, increase the number of tax bands and adjust the marginal tax rates
- Electric vehicles: Private car owners who trade in their eligible vehicles will be eligible for a waiver on the first HK$250,000 of the first registration tax. The existing equivalent waiver on the first HK$97,500 for new EV purchases will also remain in place. Hong Kong came under fire last year when it introduced the cap
- Innovation industries: Hong Kong will invest an additional HK$50 billion into innovation and technology industries with a focus on what the government sees as areas of strength -- biotechnology, artificial intelligence and fintech. Of that investment, HK$20 billion will be set aside for the Hong Kong-Shenzhen tech hub just north of the city
- Bond issuers: The government will start a three-year pilot program to encourage companies to sell bonds in Hong Kong for the first time. The amount of grant for each issuance is equivalent to half of the expenses, capped at HK$2.5 million.
- Research and Development: Enterprises will get a 300 percent tax deduction on the first HK$2 million of qualifying R&D spending, and a 200 percent deduction on the remainder
- E-sports: The emerging new industry will get a HK$100 million injection to develop a “Cyberport Arcade” competition venue and entertainment hub
- Fans of Ocean Park: Hong Kong’s long-standing tourist attraction Ocean Park, which includes a panda exhibit and aquarium, will get HK$310 million “in the next few years” for development. It’s part of a wider HK$396 million injection into the tourism industry this year
- Students: The government will give a one-off grant of HK$2,000 to each student in need to support learning, which will cost about HK$740 million. Hong Kong will pay the fees for candidates writing the 2019 secondary school exam, costing about HK$180 million. And speaking of Ocean Park, the venue will also hand out 10,000 free tickets to primary and secondary school students in the coming year
- Everybody else hoping for a handout: Anyone wishing for a repeat of the scheme announced in 2011 to hand out HK$6,000 to adult Hong Kong citizens was left disappointed. The move is in contrast with Singapore, whose budget last week included one-time payouts of S$100 to S$300 ($76-$228) depending on the income level
- Disneyland: While local competitor Ocean Park won millions in new investment, the home of Mickey Mouse did not receive any specific cash in the budget
©2018 Bloomberg L.P.