Commentary on the 2010 Budget
In response to the budget speech delivered on 24 February 2010, the Institute issued a media release and held a members' forum attended by the secretary for financial services and the treasury Prof. K.C. Chan, legislative councillor member (accountancy) Paul M.P. Chan, and the taxation committee chair (also forum chair) and deputy, Ayesha Macpherson and Florence Chan, respectively.
Overall, the Institute expressed the view that, given the clear signs of economic recovery, the budget was too cautious, the fiscal measures were mainly short-term and one-off, and the budget did not sufficiently address long-term tax competitiveness.
On the other hand, the Institute supports the proposals to build the asset management business by extending stamp duty and profits tax concessions. The Institute also welcomed the proposal to extend tax deductions to trademarks, copyrights and registered designs. The Institute, however, also recommended “super deductions” (i.e. more than 100%) for research and development expenditures to speed up innovation in Hong Kong companies.
Regarding the long-term competitiveness of Hong Kong’s tax system, the Institute had earlier advocated the following amongst other measures in its submission:
- Reduce corporate profits tax rate to 16% in 2010-11, with further progressive reductions to 15% over time.
- Improve clarity and certainty in determining source of profits and employment income.
- Shorten the time frame in finalising tax affairs.
- Introduce a group loss relief system and loss carry-back provisions.
For individuals, the Institute had encouraged the government to:
- Allow deductions for private medical insurance, subject to a HK$12,000 annual cap per person.
- Increase in the annual allowances under salaries tax by 20 percent for children, dependent parents, grandparents, siblings and disabled dependants.
On other matters, the Institute has expressed support for the introduction of a statutory corporate rescue procedure and welcomed the financial secretary (FS)’s reference to corporate rescue in the legislative programme.
Reporting on Hong Kong’s economic and fiscal performance over the past year, the FS announced that, while GDP had decreased by 2.7 percent in real terms for 2009, due to the improving situation in the latter part of the year, a surplus of HK$13.8 billion is estimated in the consolidated account for 2009-10, a vast difference from the HK$39.9 deficit projected at the time of the 2009 budget. Fiscal reserves are expected to be HK$508.2 billion at the end of March 2010 (equivalent to 21 months of government expenditure). In 2010, GDP growth is forecast to grow between 4 percent and 5 percent, and a budget deficit of HK$25.2 billion is projected. In the medium term, the government estimates an annual average growth rate of 4 percent in real terms for the period 2011-14.
More information can be found through the following links:
- Institute's budget proposals (summary and full)
- Budget highlights
- Budget speech
- Economic performance 2009
- Economic prospects 2010
