On 1 February 2012, the Financial Secretary, John Tsang Chun-wah, delivered his fifth Budget Speech to the Legislative Council. KPMG China's Budget Summary outlines the proposed changes and comments on their implications.
Surplus for the year of HK$66.7 billion is well ahead of the forecast deficit of HK$8.5 billion (revised forecast figure after additional measures were announced on 2 March 2011). The 2011 surplus was driven by the significant increase in land sales and Profits Tax and Salaries Tax collections.
Key Government concerns for 2012-13 are: (i) preventing the risk of an asset-price bubble; (ii) easing the burden of inflation; and (iii) preparing Hong Kong for the challenges ahead.
Measures worth nearly HKD 80 billion were proposed for education, medical services, social welfare, housing, infrastructure and livelihood policy areas and the promotion of economic development.
The Government announced a series of infrastructure developments, with a record HKD 184 billion to be spent on capital works devoted to projects such as the Ten Major Infrastructure Projects, cross-boundary facilities and transport infrastructural projects.
Corporate relief measures
Profits Tax for 2011-12 to be reduced by 75 percent up to a maximum of HKD 12,000.
Capital duties levied on local companies to be abolished.
Import and export declaration charges to be halved.
Waiver of business registration fees for 2012-13.
Individual relief measures
Salaries Tax (and tax under personal assessment) for 2011-12 to be reduced by 75 percent up to HKD 12,000 and increases in personal allowances.
Increase in deductions from HKD 12,000 to HKD 15,000 for mandatory MPF contributions.
Electricity subsidy of HKD 1,800 per residential electricity account.
Rates exemption for one year capped at HKD 2,500 per quarter.
An extra allowance equivalent to one month's payment for CSSA and Old Age Allowance and Disability Allowance recipients.
Additional issue of iBonds worth HKD 10 billion with a maturity period of three years targeting Hong Kong residents.
Enhancement of the existing SME Financing Guarantee Scheme.
Hong Kong Mortgage Corporation to introduce a microfinance pilot scheme.
Public consultation to be conducted in first quarter of this year on the proposed legislation to level the playing field for Islamic finance.