Budget set to extend home loan relief
Finance chief mulls lengthening 10-year tax deduction period
The government's scheme of providing tax relief for the interest paid on home loans is expected to be extended in next month's budget.
Homeowners would be able to continue to claim tax deductions of up to HK$100,000 a year beyond 10 years under an initiative being considered by Financial Secretary John Tsang Chun-wah, sources close to the government have revealed.
The government hopes the measure will provide relief to taxpayers and help stimulate the city's recession-hit economy.
The sources did not indicate the likely length of the extension. However, the Democratic Alliance for the Betterment and Progress of Hong Kong has suggested extending the entitlement period from the existing 10 years to 15 years.
The mortgage relief measure for homebuyers was announced in the 1998-99 budget by then financial secretary and current chief executive, Donald Tsang Yam-kuen.
The measure was initially introduced for five years but in the 2004-05 budget it was extended to seven years.
In 2006, the government extended the tax break again - to 10 years - to reduce the pressure on homebuyers from rising interest rates.
The finance chief is scheduled to deliver his second budget speech on February 25.
The government had originally estimated a deficit of HK$7.5 billion for the 2008-09 financial year, but sources have indicated that by the end of December it had recorded a HK$30 billion surplus.
A government source said the public expected the financial secretary to come up with some tax relief measures in the coming budget. However, handouts would not be anywhere as near as big as those last year.
In his maiden budget delivered in February last year, the financial secretary offered tax cuts, handouts and subsidies totalling HK$75 billion.
The interest rate deduction applies only to taxpayers who live in the properties for which they are claiming. It applies both to existing and first homebuyers, and taxpayers can choose the years in which they claim the deduction.
However, the 10-year entitlement period of taxpayers who have claimed the deduction continuously since it was introduced is due to expire this financial year.
It is understood that many economists suggested extending the entitlement period during their prebudget meetings with the finance chief.
'The extension of entitlement period for the deduction is worth consideration as it would not result in a huge amount of forgone tax revenue,' a government source said.
The government had estimated that extending the entitlement period would cost HK$1.2 billion in the 2006-07 financial year.
In 2006, the administration said that extending the seven-year entitlement period would benefit about 80,000 taxpaying homeowners.
Francis Lui Ting-ming, professor of economics at the University of Science and Technology, said he would not be surprised if the government took the 'political gesture' to extend the entitlement period for tax deductions for home loan interest, although the actual benefit to qualifying taxpayers would not be that great.
