Hong Kong Financial Secretary Paul Chan on Wednesday unveiled consumption vouchers, salaries tax cuts and a new scheme to attract talent as well as investment for the economic revival.
In the budget 2023-24, Chan said “I believe that Hong Kong’s economy will visibly recover this year, and I remain positive.” But the economic recovery is still in its initial stage, he added.
The city’s economy is forecast to rebound this year with gross domestic product set to expand in the range of 3.5 percent to 5.5 percent. The economy shrank 3.5 percent in 2022.
Underlying inflation is seen rising to 2.5 percent and headline inflation to advance to 2.9 percent this year.
The government also announced a new round of consumption vouchers worth HK$5,000 to each eligible resident.
To alleviate the economic pressure, Chan proposed to reduce the salaries tax by 100 percent subject to a ceiling of HK$6,000. This will reduce the government revenue by HK$8.5 billion.
With a view to further enrich the talent pool as well as attract more new capital to the city-state, Chan plans to introduce a new Capital Investment Entrant Scheme. Applicants shall make investment at a certain amount in the local asset market, excluding property.
For supporting businesses, Chan proposed reducing profits tax by 100 percent with a ceiling of HK$6,000. He also lowered the stamp duty for first-time home buyers.
The government took a “moderately liberal” fiscal stance this year. “Hence, this is still a deficit budget,” Chan said.
The government expects to register a deficit of HK$140 billion in 2022-23, which was bigger than the original estimate of about HK$56 billion. He forecast a deficit of about HK$54.4 billion for 2023-24.
The economy contracted 4.2 percent in the fourth quarter, following a decline of 4.6 percent in the third quarter. On a seasonally adjusted quarter-to-quarter basis, GDP remained virtually unchanged at the end of the year.
Following the reopening of Hong Kong’s borders and end of virus-related restrictions, the economy is set to log robust growth this year, Capital Economics’ economist Sheana Yue said.
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