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HKICPA's response to 2021-22 Budget

24 February 2021

(Hong Kong, 24 February 2021) The HKSAR Government today announced the 2021-2022 Budget, which includes ten suggestions made by the Hong Kong Institute of Certified Public Accountants (HKICPA) earlier, including those intended for job creation, career transition assistance, targeted relief measures, maintaining Hong Kong's status as an international commercial centre, facilitating digital transformation, review of the public finance revenue model, incentives for replacing aged and polluting commercial vehicles, review of Hong Kong’s tax system, tax-related support measures, and promoting the wider use of electric vehicles.
The government is right to be prudent on budget measures

Since the global economic outlook is surrounded by considerable uncertainties, the HKICPA agrees that the government needs to manage its finances carefully. The government has to efficiently use its limited resources to maximise benefits while giving priority to helping those in need. Mr Raymond Cheng, President of the HKICPA, says: "The government's recurrent income is not enough to meet the additional expenditures brought about by the pandemic, the effects of which will not be over anytime soon. Hong Kong still has to fight a protracted battle, so prudent financial management is crucial to maintain the fiscal reserves that will get us through.”

Mr William Chan, Chair of the Taxation Faculty Executive Committee of the HKICPA, says: “For the time being, ‘stabilising the economy and relieving people’s financial burden’ are of utmost importance. Otherwise, the rising unemployment rate will cause even more social issues and more people will have to resort to social security payments. Securing jobs and helping graduates find jobs are vital.”

The Organisation for Economic Co-operation and Development (OECD) made remarkable progress in 2020 on international tax reform with the Base Erosion and Profit Shifting (BEPS) 2.0 project. As a low tax jurisdiction, Hong Kong must ensure that it collects the “top-up tax” proposed to be levied under these rules. Otherwise, supplementary taxes will be levied by other tax jurisdictions in what is a zero-sum game. The development of international taxation has steered towards relying more on indirect taxes, thus reducing the dependence on direct taxes as the main source of government revenue. The current situation in Hong Kong is a consequence of its excessive reliance on direct taxes. The government also stated in the Budget that it will continue to study and discuss this issue at length. 

Mr Eugene Yeung, Convener of the HKICPA’s Budget Recommendation Committee, says: “For many years, the HKICPA has been advocating broadening the tax base. Most of the government's recurrent revenue comes from profits tax, salaries tax, stamp duty and land sales revenue, which are vulnerable to economic cycles and external shocks. With the lingering Covid-19 pandemic, the fiscal reserves will decline at a faster pace. Without stable sources of income, it will be difficult to replenish fiscal reserves. The government should therefore conduct a review of the public finance revenue model, address the problem of narrow tax base, ease long-term public finance pressure, and avoid persistent deficits.”

The HKICPA has the following response to the Budget: 

  1. Broadening the tax base: A simple and low tax system is a key element of Hong Kong’s success. Due to a narrow tax base, however, the government is overly dependent on salaries tax, profits tax, stamp duty, land sales and investment income, thereby putting pressure on Hong Kong’s fiscal reserves when faced with economic downturn. The government needs to continue to study broadening the tax base to ensure stable income. 

  2. Stamp duty on stock transactions: The government has announced an increase in stock stamp duty (from a total of 0.2% to 0.26% of the value of the transaction). Based on an estimate of the average monthly stock market turnover figures between August 2020 and January 2021, raising the stock stamp duty to 0.26% is expected to increase the government recurrent income by more than HK$20 billion per year. However, the stock stamp duty hike alone cannot provide the government with sustained, stable source of recurrent revenue. The HKICPA believes that while the government could flexibly adjust the stamp duty tax rates upwards or downwards according to prevailing economic and market conditions, it should continue to explore other solutions that can broaden the tax base as the long-term solution. 

  3. The government will not hand out cash to the public as it did last year, but continues to provide certain relief measures for businesses, such as water and electricity subsidies and rates concessions. The HKICPA understands this decision and agrees that the government should manage its finances carefully. After all, according to Article 107 of the Hong Kong Basic Law, the HKSAR shall follow the principle of keeping the expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product.

  4. During the Budget consultation, the HKICPA recommended that the government distribute consumption vouchers in order to stimulate economic growth, with consumption being directed to targeted sectors hit hard by the pandemic. Vouchers have a multiplier effect in boosting consumption. This is one of the relief measures in the Budget. The government may refer to how other countries and regions have implemented their consumption voucher schemes in order to simplify administrative procedures and accommodate the needs of different citizens.

  5. Employment support: “Teach him how to fish and you feed him for his lifetime,” so the saying goes. The HKICPA believes that a sound social policy to assist the unemployed in their transition to employment through training and retraining is more effective. In doing so, for example, the government has announced measures in the Budget to improve the existing training and retraining programmes and create new jobs in the construction sector. The Greater Bay Area Youth Employment Scheme announced in the Policy Address last November is a good start. The government may consider extending the scheme to include local employers in Hong Kong.

  6. Green bonds: The Budget plans to issue green bonds on a regular basis and expand the scale of the government's green bond programme. The HKICPA believes this will help ease the government's financial pressure. This initiative is also in line with the global environmental, social and corporate governance (ESG) trend and supports sustainable development.

  7. Asset and wealth management: The Budget refers to rule changes and support that encourage the relocation of open-ended funds domiciled overseas to Hong Kong, including subsidies for the professional service fees they need to relocate. The HKICPA believes that this measure will provide an incentive for overseas-domiciled open-ended funds to move to Hong Kong, and will help develop Hong Kong into a major asset and wealth management centre in Asia. 

  8. The government also mentions in the Budget that HK$25 billion will be brought back to the fiscal reserves from the Future Fund. The HKICPA believes that the government needs to maintain transparency in relation to existing or newly established funds to ensure that the funds are used appropriately.










  1. 拓闊稅基:簡單及低稅制是香港賴以成功的基本,但由於稅基狹窄,政府過份依賴薪俸稅、利得稅、印花稅、賣地及投資收益,當經濟下滑時,庫房便會面對一定壓力。政府有需要繼續研究擴闊稅基,確保穩定的收入。

  2. 股票印花稅:就政府上調買賣雙方股票印花稅,從每宗交易金額共0.2%上調至0.26%。按照二零二零年八月至二零二一年一月的平均股市成交量估計,上調股票印花稅後,有望可為庫房每年增加超過200億港元經常性收入,公會認為政府可按經濟及市場狀況,靈活上或下調整相關印花稅稅率。然而,此舉不能為政府提供持續穩定的收入來源,公會認為政府應繼續探討其他能拓闊稅基的可行方案,才是長遠的解決辦法。

  3. 政府於財政預算案中並沒如去年般向市民直接發放現金,但仍保持針對性的企業紓緩措施,例如水電及差餉寬減等,公會對政府審慎理財表示理解。按香港基本法第107條,香港特區的財政預算以量入為出為原則,力求收支平衡,避免赤字,並與本地生產總值的增長率相適應。

  4. 公會於預算案諮詢中,建議政府派發消費券,透過具導向性、針對性的方式鼓勵消費,帶動零售市場並扶持受疫情影響嚴重的行業,從而產生乘數效應。公會建議政府可參考其他地區和國家的消費券做法,以及考慮行政成本及照顧不同市民的需要。

  5. 支援就業:「授人以魚」,不如「授人以漁」。公會認為,政府制訂全面的產業政策,支援失業人士參與再培訓或轉型,為市場提供不同就業機會,可能更具效益。預算案中,政府了提出有相應措施,包括優化再培訓計劃,為建造業創造就業機會,以支援市民就業。去年11月《施政報告》宣佈的「大灣區青年就業計劃」是很好的開始,政府可考慮擴闊計劃以涵蓋香港本地僱主。

  6. 綠色債券:預算案計劃定期發行綠色債券並擴大政府綠色債券計劃規模,公會認為有助紓緩政府財政壓力,亦能配合環球市場的環境、社會及管治趨勢,支持可持續發展。

  7. 資產及財富管理:就預算案中提到修例讓海外註冊的開放型基金能遷冊到香港並提供支援,包括為遷冊時需要的專業服務費提供補貼。公會認為此舉為海外註冊開放型基金遷冊來港提供誘因,並有助香港發展成亞洲主要的資產及財富管理中心。

  8. 政府在財政預算案中提及從未來基金將250億港元回撥庫房。公會亦認為,政府不論於現有或新設立的基金,需保持透明度,確保資金用得其所。