KPMG survey results vs Budget proposals | KPMG | CN
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KPMG survey results vs Budget proposals

KPMG survey results vs Budget proposals

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KPMG China recently conducted a survey of over 300 senior business executives about their business concerns in Hong Kong and their expectations regarding the 2018-2019 Hong Kong Budget. Our key survey findings are highlighted below:

Top priority for the 2018-2019 Hong Kong Budget

  • Almost half of the respondents consider strengthening Hong Kong’s position as an international business centre as the top priority for the 2018-2019 Hong Kong Budget.
  • Other respondents suggest capturing the ’Belt and Road’ and Greater Bay Area opportunities, and focusing on youth support.

Enhancing the competiveness of Hong Kong’s tax system

  • According to the respondents, the most effective measure to enhance competitiveness is introducing a tax incentive for regional headquarters.
  • Other views include introducing group tax loss relief and expanding the scope of tax exemption for funds.

Measures/new tax incentives targeting the middle class in Hong Kong

  • The majority of respondents suggest that the existing Salaries Tax bands and/or tax rates for individuals should be adjusted.
  • Other respondents prefer allowing a tax deduction for medical insurance premiums paid and introducing a working mother allowance.

Tax measures to promote R&D activities in Hong Kong

  • Results show that respondents equally support all three of the proposed measures for promoting research & development (R&D) activities in Hong Kong (i.e. ‘expand the scope of “approved research institutions” for R&D tax deduction purposes’, ‘allow tax losses incurred from R&D activities to be cashed out instead of being carried forward’ and ‘expand the scope of deductible intellectual property-related capital expenditure’).

Below we summarise how the 2018-19 Budget proposes to address some of the concerns identified in the KPMG survey:

Increase competitiveness and capture business opportunities

  • Extend the scope of the Profits Tax exemption on debt securities to attract corporate bond issuance
  • Set aside HKD 500 million for the development of the financial services industry
  • Expand the government’s network of Economic and Trade Offices, including setting up an office in Thailand, to enhance trade relations with ASEAN countries and support the ‘Belt & Road’ Initiative
  • Expand trade, investment and tax treaty networks to open up new markets

Promote R&D activities in Hong Kong

  • Set aside HKD 20 billion for developing the Hong Kong-Shenzhen Innovation and Technology Park
  • Inject HKD 10 billion in the I&T Fund supporting applied R&D
  • Allocate HKD 20 billion for establishing research clusters on healthcare technologies, and AI and robotics, as well as for upgrading facilities at the Science Park

Tax measures for individuals

  • Reduce Salaries Tax and tax under personal assessment by 75%, capped at HKD 30,000
  • Widen the Salaries Tax rate bands from HKD 45,000 to HKD 50,000
  • Increase the number of tax bands from four to five, and adjust the marginal tax rates to 2%, 6%, 10%, 14% and 17% respectively
  • Increase the basic and additional allowances for children and dependent parents or grandparents
  • Increase the tax deduction ceiling for elderly residential care expenses
  • Introduce a tax deduction for Voluntary Health Insurance Scheme premiums, subject to a ceiling of HKD 8,000
  • Propose tax deductions for purchasing deferred annuity products and MPF voluntary contributions

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