- The Budget for the 2024-25 fiscal year announced a full withdrawal of all demand-side management measures for residential properties with immediate effect, bringing positive factors to the economic recovery.
- KPMG advises the government to conduct a comprehensive review of the tax system, taking into consideration Hong Kong's future economic positioning, and to make corresponding adjustments to the tax policy.
HONG KONG SAR - Media OutReach Newswire - 29 February 2024 - KPMG welcomes the Hong Kong government's Budget, recognising it as taking a balanced approach to development, addressing the needs of both citizens and businesses, which will effectively create opportunities and drive high-quality economic development in the city. Despite the forecast fiscal deficit being larger than expected, the government's fiscal reserves remain healthy.
John Timpany, Head of Tax in Hong Kong, KPMG China, says: "The government proposes various strategies to increase revenue and contain expenditure. For example, the recently announced Productivity Enhancement Program is expected to trim 1% of recurrent government expenditure in each of the next two fiscal years, with the saved resources being reallocated internally. These stringent expenditure control measures are a prudent step. While unlikely to be welcomed, proposals such as resuming the collection of Hotel Accommodation Tax and introducing a two-tiered standard tax rate regime for salaries tax and tax under personal assessment will increase government revenue in the short term without significantly impacting the majority of citizens and businesses."
Alice Leung, Tax Partner, KPMG China, says: "KPMG previously raised suggestion to the government regarding the profits tax allowances for industrial and commercial buildings and structures. We are pleased to see that the government has proposed optimizations in the Budget, including the removal of the time limit for claiming the allowances. Additionally, we welcome the government's decision to completely eliminate the demand-side management measures for residential properties. These measures were originally implemented to curb speculative trading, which is no longer a critical concern. Since the Policy Address in October last year, which dialed back the measures, we have not seen a resurgence in speculative activity in the property market. Eliminating these cooling measures could bring positive momentum to the economy."
Stanley Ho, Tax Partner, KPMG China, says: "KPMG welcomes the measures in the Budget, which aim to attract businesses, capital, and talent. This includes investing in innovative technologies and nurturing talent in the innovation and technology sector. To promote Hong Kong as an international innovation and technology centre, we are pleased to see the government's continuing support and assistance to enable high value-added technology industries and enterprises to establish a foothold in the city."
KPMG welcomes the reaffirmation of the government's commitment to optimising tax incentives for funds and family offices, and recommends that the government launch and implement relevant plans as soon as possible to further promote the development of asset management in Hong Kong. In addition, KPMG recommends that the government comprehensively review the tax system to allow Hong Kong to maintain its competitiveness.
KPMG believes that the government could provide further tax incentives and exemptions to attract global companies to establish regional headquarters in Hong Kong, such as adopting 50% of the normal tax rate (i.e. 8.25%) for profits derived from regional headquarters in the city. Additionally, KPMG recommends introducing special tax loss measures, promoting investment in start-ups and scientific research projects, and easing the current stringent tax deduction conditions for interest payments to enhance the tax system.
29 February 2024
