HKICPA welcomes the Government's 2025-26 Budget
The Hong Kong Institute of Certified Public Accountants (HKICPA) welcomes the Government's 2025-26 Budget, acknowledging its pragmatic approach to fiscal consolidation while aiming to maintain the quality of public and social services. Meanwhile, the Budget's targeted revenue-generating measures are believed to contribute to financial stability and provide support for sustained economic growth amid global economic and geopolitical challenges.
The HKICPA is specifically pleased to note that the Budget has incorporated, in part, several of its prior recommendations, including introducing a boundary facilities fee on private cars departing via land boundary control points, reviewing certain tax deduction arrangements for intellectual property (IP)-related industries, implementing a series of measures to support research and innovation-driven technological development in Hong Kong, further developing the mega-event economy to revitalise the Hong Kong brand, and promoting the growth of green finance and the further development of green transportation.
HKICPA welcomes 2025-26 Budget
The Financial Secretary announced an estimated fiscal deficit of HK$87.2 billion for the fiscal year 2024-25, which is lower than the Government’s most recent forecast and about HK$10 billion less than the earlier projection made by the HKICPA. This reduction can be attributed in part to the Government's decision to return the remaining balance of the Anti-epidemic Fund to the Treasury. This fiscal deficit is due to several contributing factors, including lower-than-anticipated land sale revenues and a deceleration in economic growth over the course of the year.
Edward Au, President of the HKICPA, said: "We appreciate the Budget's diversified measures, a number of which align with our recommendations to drive sustainable economic growth. With global economic and geopolitical conditions constantly shifting, it is hoped that the Government will be able to follow through on these plans to keep Hong Kong's economy on track, while making the best use of public resources and maintaining Hong Kong’s competitiveness. Looking ahead, we hope the fiscal deficit will be gradually eliminated, strengthening Hong Kong's long-term financial health."
Fiscal consolidation programme for long-term financial stability
The HKICPA welcomes the Government's commitment to reinforcing its fiscal consolidation programme, which includes a cumulative reduction in government recurrent expenditure by 7% through the fiscal year 2027-28, and the streamlining of administrative processes to drive cost efficiencies and ensure the long-term sustainability of public finances. Furthermore, it is advisable for the Government to continue allocating resources to sectors that generate societal and economic benefits, thereby facilitating growth in government revenue and citizens' quality of life alongside economic growth.
Regarding the freezing of salaries of civil servants, the executive authorities and others, and a review of the civil service establishment, the HKICPA acknowledges the importance of maintaining a balanced impact on both the private sector and public services. In addition, the HKICPA is supportive of the Government's initiative to leverage innovative technologies, including artificial intelligence (AI), to improve overall operational efficiency and cost-effectiveness.
Issuing bonds to finance key infrastructure projects
The Budget announced a moderate increase in bond issuance. For the fiscal years 2025-26 through 2029-30, the Government plans to issue bonds between HK$150 billion and HK$195 billion annually. The HKICPA concurs that as infrastructure projects grow in scale, a moderate approach to bond issuance is a prudent strategy for addressing part of the funding requirements for public infrastructure. Besides, the Government is recommended to consider exploring public-private partnerships (PPP) as an additional means to support specific infrastructure developments.
Adjustments to Elderly Concessionary Fare Scheme
The Budget proposes changes to the HK$2 Elderly Concessionary Fare Scheme, including capping the number of subsidised trips per month and requiring passengers to pay 20% of fares for journeys exceeding HK$10. These adjustments can help to address overuse of the scheme. However, the Government is advised to conduct further studies to analyse elderly travel patterns and demographic shifts to ensure the scheme remains financially sustainable and supportive of elderly needs.
Apart from short-term measures such as reassessing public service fees to increase revenue, it is hoped that, over the long term, the Government will undertake a thorough review of Hong Kong’s tax system and investigate viable options for establishing new revenue streams. Eugene Yeung, the Chairman of the Taxation Faculty Executive Committee of the HKICPA, said: “With major changes in the international tax environment in recent years, it is time for a comprehensive review of Hong Kong’s tax system, including to improve the certainty of tax treatment and find long-term solutions for a stable fiscal future. This review should also look into issues like enhancing tax breaks for research and development, and IP-related businesses, to help Hong Kong stay ahead of the game.”
Igniting economic growth engines
Revitalising the Hong Kong Brand
The HKICPA welcomes the Budget's commitment to revitalising the Hong Kong brand by promoting mega events and thematic tourism. These initiatives are anticipated to draw high-calibre international visitors, thereby fostering growth in both the tourism and retail sectors. In light of shifting local consumption patterns and cross-border travel trends, it is also important for the Government to establish a dedicated task force aimed at addressing these challenges and refining its tourism strategies. Furthermore, it is advisable to consider both tax and non-tax incentives as a means of attracting talent pertinent to the mega-event economy.
Boosting innovation and technology
The HKICPA welcomes the Budget’s continued commitment to fostering Hong Kong’s innovation and technology (I&T) sector and IP-related industries, alongside advancements in AI, which is a positive step. These measures are expected to drive I&T growth both locally and across the Greater Bay Area.
Agnes Cheung, Deputy Chair of the Taxation Faculty Executive Committee of HKICPA, said: “With regional competition intensifying, Hong Kong must retain its traditional competitive strengths while strengthening its capabilities in innovation and intellectual property. The Budget’s initiatives in these areas are expected to help Hong Kong focus on development opportunities and maintain economic growth.”
Support for SMEs
The HKICPA supports the Hong Kong Trade Development Council (HKTDC)’s launch of the ‘E-Commerce Express’ initiative, which aims to help SMEs seize opportunities in the emerging economy. This is in line with the HKICPA’s recommendations on introducing measures to support SMEs’ digital transformation. To alleviate the financial constraints faced by SMEs, the HKICPA suggests lowering the tax rate under the two-tier profits tax system or raising the threshold from HK$2 million to HK$4 million in the future.
Green finance and sustainable development
The Budget has announced the extension of the Pilot Green and Sustainable Finance Capacity Building Support Scheme until 2028, which will help cultivate a more robust local talent pool in green finance, thereby supporting Hong Kong's long-term sustainable development. To further strengthen Hong Kong's sustainability disclosure ecosystem, it is recommended that the Government introduce additional tax incentives that would encourage large publicly-accountable entities to voluntarily adopt the HKFRS Sustainability Disclosure Standards, issued by the HKICPA, prior to their mandatory implementation timeline.
Relief measures
The Budget has scaled back relief measures for taxpayers and the public, capping the salaries tax and profits tax reduction for 2024-25 at HK$1,500 and providing a rates concession only for the first quarter of 2025-26, with a ceiling of HK$500 per rateable property. Given the substantial fiscal deficit, the Government's decision to further reduce relief measures is understandable. However, to ease the financial burden on taxpayers and maintain a competitive labour force, the HKICPA suggests adjusting personal allowances and dependent parent allowances in line with inflation.
In addition, in the context of encouraging the retention of local talent in the workforce, the HKICPA suggests that the Government considers increasing the basic tax allowance for parents of newborns and skilled retirees of 65 years and above, for a period of two years.
Photo Caption: Edward Au, President of the HKICPA (Centre), Eugene Yeung, Chairman of the Taxation Faculty Executive Committee Chairman of HKICPA, (left) and Agnes Cheung (right), Deputy Chairman of the Taxation Faculty Executive Committee of the HKICPA, respond to the Government’s 2025-26 Budget.
