Save half of windfall, tax institute urges
Half the government's expected HK$100 billion budget windfall should be kept as savings and only about HK$20 billion returned to the community, the Taxation Institute of Hong Kong has said.
A more conservative and prudent approach to returning wealth to the public would help reduce the burden of introducing measures such as a long-term health-care-financing system, the institute said.
Council member Marcellus Wong Yui-keung said balancing the budget was crucial to government finances and any excess surplus should be saved rather than spent immediately.
The surplus over the years has averaged about HK$50 billion, which the institute said should be used as a spending threshold. Everything above this threshold should be saved.
The institute submitted its recommendations to the government one month ago. The budget will be announced on February 27.
'The last time we had a large surplus was in 1997-98 and that was followed by a recession. Hopefully, that won't happen this time,' institute president Peter Kung said.
The surplus in 1997-98 reached HK$86.9 billion, but the Asian financial crisis wiped it out and left the government with a HK$23.2 billion deficit the following year.
'Technically, with such a large surplus, you can say the government is over-taxing in the revenue it collects. But this year's surplus is mainly because of all the stamp duty the government is collecting,' Mr Wong said.
The institute does not see any need to change or remove stamp duties, which are levied on stock and property transactions. Raising the personal allowance for taxpayers is also not recommended.
The institute wants the profits tax rate to fall, however, from 17.5 per cent to 16.5 per cent, and the marginal salaries tax cut by 1 percentage point. The tax thresholds would become 1 per cent, 6 per cent, 11 per cent and 16 per cent, while each tax band would widen from HK$35,000 to HK$40,000.
The government should also consider waiving a full year of rates on all properties, capped at HK$5,000 per unit per quarter, the institute said.
The amount the institute estimates taxpayers will save on their tax bills if the government implements its recommendations: 1%