HKICPA welcomes the Government's 2026-27 Budget
The Hong Kong Institute of Certified Public Accountants (HKICPA) welcomes the Government’s 2026-27 Budget released today. The HKICPA considers that the proposals set out in the Budget are concrete and pragmatic at accelerating Hong Kong’s economic transformation, consolidating Hong Kong’s brand as a world-class financial market and aligning with the national 15th Five-Year Plan (FYP) to support national development.
The HKICPA is pleased to note that the Budget has incorporated a number of its earlier recommendations, including promoting digitalisation and the application of artificial intelligence (AI) and quantum computing; promoting commodities trading, including gold trading, through further tax incentives; reviewing and optimising the tax arrangements for research and development (R&D) expenditure; broadening the scope of qualifying investments eligible for family office tax concessions; supporting the development of the intellectual property (IP) sector by reviewing tax deductions for IP acquisitions; studying on amending the Stamp Duty Ordinance to relax the restrictions on intra-group relief; supporting the internationalisation of the Renminbi; introducing measures to support Mainland enterprises in using Hong Kong as a platform to “go global”; increasing personal and married person’s allowances; and promoting the “silver economy”.
Improving outlook for public finances
The Financial Secretary announced an estimated fiscal surplus of HK$2.9 billion for the 2025-26 financial year, slightly better than the HKICPA’s earlier estimate. The figure represents a marked improvement compared with the estimate in last year’s Budget, primarily due to higher stamp duty revenue driven by the robust stock market, and an increase profits tax revenue. At the same time, as land sale revenue remained below expectations and investment in large-scale infrastructure projects continued, the Capital Account continued to record a deficit. Nevertheless, Hong Kong’s debt-to-GDP ratio is only around 10%, well below that of most advanced economies. Coupled with fiscal reserves of about HK$660 billion, and over HK$4 trillion in Exchange Fund assets managed by the Hong Kong Monetary Authority, Hong Kong’s current fiscal position remains solid.
Stephen Law, President of the HKICPA, said: “We broadly welcome the measures proposed in the Budget, many of which are consistent with the directions recommended by the HKICPA and will help enhance Hong Kong’s long-term competitiveness. We are also pleased to see the gradually improving outlook for public finances. We hope the Government will continue to strike a balance between prudent financial management and investing for the future, driving steady growth in the economy and government revenue, so that the public can share in the fruits of economic success. On the other hand, in the face of increasing global competition, the Government should co-operate with different sectors to continue to boost the financial market, including expanding the range of investment products to consolidate Hong Kong status as an IFC.”
Strengthening the tax system and raising revenue
The HKICPA welcomes the Budget’s proposal to establish a Tax Policy Advisory Committee to enable Hong Kong’s tax policy to more effectively support economic development and enhance Hong Kong’s competitiveness. The HKICPA anticipates the Government will, in due course, undertake a more comprehensive review of Hong Kong’s tax system and explore possible new sources of revenue, to safeguard the overall integrity of the tax regime and ensure that Hong Kong’s public finances remain resilient and sustainable over the long term. In its earlier submission, the HKICPA also put forward additional revenue-raising measures, introducing boundary facilities fees, to help recover infrastructure and operating costs; offering a time-limited “tax amnesty” arrangement for small businesses, online shops and key opinion leaders (KOLs) to encourage voluntary disclosure of tax liabilities; and rolling out tax compliance education programmes.
Government’s fiscal consolidation programme
The Financial Secretary announced that the Government would continue to implement its fiscal consolidation strategy by reducing recurrent expenditure by 2% in each of the 2026-27 and 2027-28 financial years, and by reducing the size of the civil service by 2% in each of the two years. The HKICPA agrees that the Government should continue to follow the principle of “financial prudence” in reviewing the level of public expenditure. It is recommended that cost savings be achieved by streamlining operations and adopting technologies, while public spending should, as far as possible, be prioritised for areas that benefit society and drive growth. On the other hand, regarding the Budget’s proposal to resume the civil service pay trend survey – used to inform annual pay adjustments for civil servants – the HKICPA considers the decision reasonable. A moderate pay rise would have a limited impact on public finances, while boosting civil servant morale and having a positive effect on the labour market more broadly.
Bond issuance to finance key infrastructure projects
The Budget announced that the Government would continue to support major infrastructure development through its bond issuance programme. It is common internationally for governments to issue bonds to meet the funding needs of large-scale infrastructure projects. Hong Kong’s debt-to-GDP ratio remains very low by international standards, and the HKICPA therefore believes this will not undermine investor confidence in Hong Kong’s fiscal position. In addition to issuing bonds, the HKICPA believes the Government could continue to explore advancing certain infrastructure projects through public–private partnerships (PPPs) and Build-Operate-Transfer (BOT) models.
Relief measures
As the Government’s fiscal position stabilises, the HKICPA supports the relief measures provided for taxpayers and the public in the Budget, including a 100% reduction of salaries tax and profits tax for the 2025-26 year of assessment, subject to an aggregate ceiling of HK$3,000, as well as a rates concession for the first two quarters, subject to a ceiling of HK$500 per quarter. The HKICPA also welcomes the increase of the basic allowance to HK$145,000, together with upward adjustments to the married person’s allowance and allowances for children and dependent parents.
Eugene Yeung, Chairman of the Taxation Faculty Executive Committee of the HKICPA, said: “The relief measures proposed in the Budget would increase taxpayers’ disposable income, which should help reduce citizens’ financial burden. In the long run, given the impact on Hong Kong of substantial changes in the international tax landscape in recent years, among other things, the Government is urged to conduct a more extensive review of Hong Kong’s tax system. This is needed to enhance tax certainty and efficiency, and to continue to explore additional sources of revenue, to help strengthen the resilience of our public finances, in the face of challenges such as an ageing population and increasing demands on healthcare and welfare spending.”
Speeding up economic transformation and national development integration
Hong Kong’s role as an international financial centre
The HKICPA supports the Government’s comprehensive measures to reinforce Hong Kong’s status as an international financial centre, including providing additional tax concessions and flexibility for corporate treasury centres and their affiliates; broadening the scope of qualifying investments eligible for family office tax concessions; and promoting commodity trading, including gold trading, through further tax incentives.
Supporting Mainland enterprises to “go global”
The HKICPA welcomes the Budget’s adoption of its recommendations to support Mainland enterprises in using Hong Kong to expand their overseas business. This includes establishing a cross-sector professional services platform to mobilise Hong Kong’s professional service providers, including the accounting profession, to support companies “going global”. The HKICPA stands ready to support these measures and believe they will help consolidate Hong Kong’s position as a leading business hub in the region, while attracting more Mainland and other regional enterprises to use Hong Kong as a springboard for overseas expansion, in line with the national “Go Global” development strategy.
Developing an innovation-driven economy
The HKICPA welcomes the Financial Secretary’s commitment to promoting the industrialisation of AI. By strengthening the adoption of AI across government departments and investing in local AI research and applications, these initiatives are expected to create new opportunities for society and the economy, while also helping to streamline government operations. The Budget also provides strong support for the development of Hong Kong’s innovation and technology (I&T) and IP sectors. This includes recognizing the needs of patent valuation by implementation of the two-year two-year “Pilot Patent Valuation Support Scheme". The Institute will strive to provide support in the development of patent valuation services. Moreover, the HKICPA welcomes the Government’s consultation with stakeholders on proposed tax deduction arrangements for capital expenditure on the purchase of IP or rights to use IP and establishing an IP Academy to develop a talent pipeline, alongside concerted efforts to advance quantum computing. The HKICPA believes these measures will have a positive impact on Hong Kong’s future development and will help stimulate innovation activities both locally and across the Greater Bay Area, in line with the HKICPA’s long-standing advocacy.
Sustainable community development
The Budget proposes that the first registration tax (FRT) concession for electric private cars under the “one-for-one” arrangement will not be extended after it expires at the end of March. However, the HKICPA considers that the Government should continue to extend the “one-for-one” arrangement. With the Government set to cease the registration of new fuel-propelled private cars by 2035 or earlier, promoting broader adoption of electric vehicles supports Hong Kong’s goal of achieving carbon neutrality by 2050, and further strengthens Hong Kong’s position as an international green and sustainable finance hub. At the same time, the HKICPA recommends that the Government continue to support sustainable development, including extending the EV-charging at Home Subsidy Scheme to promote green transport, and continuing to support new energy transport initiatives.
Agnes Cheung, Convenor of HKICPA’s Budget Proposals Task Force, said: “With regional and global competition intensifying, Hong Kong needs to speed up its economic transformation, including accelerating digitalisation and strengthening its growth drivers in areas such as innovation and technology and intellectual property. To achieve this, an adequate pipeline of suitable talent must also be put in place. The Budget’s initiatives in these areas will help Hong Kong focus on the relevant development opportunities and enhance the sustainability of its future economy.”
Based on the latest estimates in the Budget, the Government’s fiscal position has improved markedly compared with a year ago, reflecting both the robustness of Hong Kong’s economy and that the Government’s fiscal consolidation measures are beginning to yield results. However, with population ageing and other challenges and uncertainties ahead, the HKICPA recommends that the Government should continue to uphold the principle of maintaining financial prudence while investing in the future.
Stephen Law, President of the HKICPA (Centre), Eugene Yeung, Chairman of the Taxation Faculty Executive Committee Chairman of HKICPA, (left) and Agnes Cheung (right), Convenor of HKICPA's Budget Proposals Task Force, respond to the Government’s 2026-27 Budget.
