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Preparing the Budget under stormy weather
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To address the pressure on small and medium enterprises (SMEs) and citizens caused by the further economic slowdown, I announced a new round of support measures last week, which include the reduction of water and sewage charges, provision of electricity subsidies, and further concession of rates for non-domestic accounts. Taxpayers of profits tax, salaries tax and personal assessment may apply for payment of tax by instalments without paying the current surcharge of 5% to 10%. There are also some fee waiving measures for the tourism industry, recycling industry and securities industry. All these measures involve over $4 billion in total. In addition, we have frozen the rents and waived fees for most of the government land short-term tenancies, temporary waivers for varying the terms of the land grants. And any review of rental/ fee of wholesale food stalls and related facilities, as well as the Public Cargo Working Areas will be frozen or waived.
Since mid-August, we have so far announced four rounds of relief measures, with a total amount of some $ 25 billion. This has not yet taken into account measures launched by public organisations in response to government’s appeal. In terms of supporting enterprises and safeguarding jobs, our strategy is to have some general measures to benefit most industries, supplemented by targeted measures focusing on industries that have been hit hard. General measures, such as subsidising electricity charges and waiving rates, will benefit most industries. On targeted measures, the reduction of water and sewage charges in this round will benefit mostly the catering industry, while measures in the past rounds are more targeted at the tourism and transportation industries. We hope that we can assist the enterprises in these industries by reducing their expenses.
On alleviating people’s financial burden, funding for the first round of measures announced in mid-August, covering electricity subsidies for domestic accounts, additional allowances to social security recipients, allowances for students, and paying one month's public housing rental etc. was approved by the Finance Committee of the Legislative Council last week. These measures will be launched as soon as possible to benefit the general public.
The first round of measures also includes an enhanced rate for tax concessions, i.e. reduction of 100% of salaries tax, personal assessment and profits tax for the 2018-19 year of assessment, with a ceiling of $20,000. Under this concession, more than 1.2 million wage earners and 60 000 SMEs will no longer be required to pay tax. In the latest round of measures, we have waived the surcharges for payment by instalments by taxpayers. One point to note is that, the tax bills currently being issued comprises the payable tax for 2018-19 and the provisional tax for 2019-20, of which the latter is calculated based on the assumption that the taxpayer will receive the same amount of salary/ profit in 2019-20 as in the previous year (ie. 2018-19). If the taxable income of a taxpayer decreased by more than 10% due to various reasons, such as underemployment, reduction of bonuses, or drop in company's profit due to poor business, one can request the Inland Revenue Department (IRD) to review the tax assessment and adjust the provisional tax for 2019-20. Relevant applications must be filed to IRD within 14 days of the date of issue of the notice for payment of the provisional tax or 28 days before the due date for payment.（For details, please visit:
https://www.gov.hk/tc/residents/taxes/taxfiling/object/provisional.htm）
In the light of the worsening economic environment and the unsettled violence, both Government tax and land revenues will decrease this year. Together with the some $20 billion plus additional expenses involved in the several rounds of relief measures, it is estimated that the HKSAR Government will have a deficit for this fiscal year by the end of March 2020, which is the first time in 15 years but still affordable to us. As to whether the fiscal deficit will persist, it very much depends on the development of social events and external factors. We will pay close attention to the changes. Generally speaking, we consider that at the time of economic downturn, as long as it is financially affordable, the Government should adopt an expansionary fiscal policy to support the economy, relief people’s burden and stabilise confidence through countercyclical measures. We will therefore maintain or even increase Government expenditures with a view to reducing the pressure on citizens and enterprises as long as it is financially affordable.
Some of my friends joked that the various rounds of relief measures introduced in recent months together are akin to a small-scale budget, so what else could I deliver for the Budget to be announced on February 26 next year? Indeed, we have been working on the Budget in parallel and organised a number of consultation sessions. We will start to gauge comments from the general public from tomorrow. We welcome your views and insights through email, webpage and social media.
Hong Kong is now facing unprecedented challenges. The social turmoil in the past six months has caused tremendous operating pressures to many companies, especially SMEs. Some citizens' incomes have dropped significantly, bringing heavy burdens and anxiety to livelihoods. And many citizens are feeling unsafe and depressed because of the social chaos, violent damages and attacks. No matter who is right and who is wrong, we must not ignore the damages to the economy, society and livelihoods caused by the social unrest. Ending violence and restoring social order are our top priority. Christmas is around the corner. If violence and attacks still persist in this peak season for retail, one can expect gloomy sales, business shutdown and layoff. Government resources alone will not be able to address all the problems. To ride out of the storm, we have to resolve our difficulties in a peaceful and harmonious manner and set aside fight and violence. I am confident that sincere dialogues and mutual understanding will set Hong Kong on the path to peace and prosperity again.
December 8, 2019
