KPMG China welcomes the HKSAR Government’s proposed measures to maintain Hong Kong’s economic development and fiscal health, support local enterprises, cope with market volatility and safeguard employment.
The budget proposal is in many ways a case of ‘business as usual’. The Government announced a sizeable surplus forecast of HKD 30 billion for 2015-16, and has proposed a number of one-off relief measures, including salary and profits tax reductions of up to 75 percent capped at HKD 20,000, a waiver of business registration fees, an extra allowance to social security recipients and a waiver of property rates, with a ceiling of HKD 1,000 per quarter.
KPMG China supports the one-off relief measures for SMEs, including an extension of the application period for the “special concessionary measures” under the “SME Financing Guarantee Scheme”, a 10 percent reduction in the annual guarantee fee rate for the measures, and the removal of the minimum guarantee fee.
However, while many of the one-off or short-term measures are welcome, KPMG China hopes to see more in the form of a longer-term focus. In this regard, the Housing Reserve set up in support of public housing development, the HKD 200 billion set aside for the ten-year hospital development plan and the Future Fund are welcome developments.
Another encouraging measure is the Government’s focus on nurturing innovation through initiatives related in large part to R&D, FinTech, startups, and the so-called Creative Industries. Unfortunately, however, the proposals stopped short of where certain other jurisdictions have headed particularly, for example, in the case of tax incentives for R&D activities. Enhancements such as the additional three categories of intellectual rights eligible for deduction on purchase, while welcomed, may also have limited substantive benefit.
From a social perspective, KPMG China supports the Government’s particular focus on caring for people’s livelihood through investment in healthcare and additional support for the under-privileged.
KPMG China welcomes the Government’s commitment to modernise its tax legislation to ensure that Hong Kong maintains a fair tax environment, aligns its tax system with international standards and enhances its competitiveness. The Financial Secretary, the Hon John C Tsang, referenced both legislation introduced earlier in the year to facilitate the automatic exchange of information and, separately, the international framework being developed by the Organisation for Economic Co-operation and Development (OECD) to defend against Base Erosion and Profit Shifting (BEPS). The Financial Secretary also stated that Hong Kong would consider participating in the BEPS framework. How Hong Kong’s participation is affected remains to be seen as there are some fundamental potential impediments to Hong Kong signing up to certain international conventions.
KPMG China looks forward to the Government following through with the implementation of the new matters raised in today’s announcement.
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