Hong Kong budget: deficit, stamp duty and national security law spending among key takeaways from finance minister’s speech

Announcing a record deficit of HK$257.6 billion this year, Financial Secretary Paul Chan Mo-po told Hongkongers on Wednesday that a raft of countercyclical measures costing HK$120 billion were necessary to stabilise the economy and relieve people’s burden. He also identified future areas of economic growth shaped by the coronavirus pandemic and changing geopolitical landscape in the region. Here are the six key takeaways from his budget. 1. Deficit every year Chan warned that Hong Kong would suffer an annual deficit in the next few years because of rising recurring expenses and one-off anti-epidemic measures. For the next financial year, the deficit would hit HK$101.6 billion, accounting for 3.6 per cent of gross domestic product. “In other words, Hong Kong will record a deficit for a number of years after achieving a surplus for 15 years,” Chan said. Financial reserves are estimated at HK$775.8 billion by the end of March 2026, representing 22 per cent of GDP, or equivalent to 12 months of government expenditure. But he said expenditure on education, social welfare and health care would not be cut to safeguard people’s livelihoods and maintain public confidence. HKEX shares slump as government raises stamp duty on stocks 2. Raising stamp duty tax on stocks; government bureaus to cut spending To raise revenues, the government would increase the stamp duty levied on stock trading to 0.13 per cent from the existing 0.1 per cent. This means each buyer and seller of a stock would be subject to a minuscule levy. The government forecasts the measure will bring in HK$12 billion in revenue during its first year of operation. Chan also suggested raising the rate for the first registration tax for private cars, including electric ones, by 15 per cent, and increasing the vehicle licence fee by 30 per cent. The adjustments would take place on Wednesday. These would also help relieve traffic congestion, he added. On cost-cutting, Chan said there would be zero growth in the number of civil servants in 2021-22, and all policy bureaus and departments would be required to reduce expenditure without affecting livelihood-related spending. The target was to trim recurrent spending by 1 per cent in 2022-23, with the savings estimated at about HK$3.9 billion. 3. Consumption e-vouchers for the first time, but sweeteners reduced For the first time, the government will hand out electronic consumption vouchers. Every permanent resident and new arrival aged 18 or above will receive HK$5,000 in instalments. This will benefit 7.2 million people and cost HK$36 billion. Chan said the measure, as opposed to a direct cash handout to people’s bank accounts as in last year, was to “facilitate the speedy recovery of the consumption market”. Meanwhile, the usual sweeteners were to be reduced. They are worth HK$80 billion, 33 per cent lower than last year’s HK$120 billion. For example, salaries tax and tax under personal assessment for the year 2020-21 will be cut by a maximum of HK$10,000, down from last year’s ceiling of HK$20,000. The allowance offered to eligible social security recipients would be equal to half a month of the standard rate Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance, as opposed to one month’s allowance in last year. Hong Kong finance chief says vaccinations ‘priority’; over 10 Covid-19 cases expected 4. Loans for the jobless Unemployed Hongkongers will be offered low-interest loans – capped at a level of six times of an applicant’s previous average salary, or HK$80,000, whichever is lower. HK$15 billion would be set aside for the loans under the one-off scheme fully guaranteed by the government. Individuals who can prove to a bank they have been unemployed for two months can apply for a loan at an annual interest rate of 1 per cent. Applicants can just repay their interest rate rather than the principal amount in the first year. Those who repay the money on time within the next five years would get the interest back at the end. 5. Repositioning economy with China factor; some support measures for industries After giving an assessment of the major development trends for Hong Kong in the wake of the coronavirus pandemic and amid changing geopolitical conditions, Chan said the city had huge development potential in areas including financial services, IT, green economy, air cargo, supply chain management and professional services. The city’s leading position in the global financial market must be strengthened, to assist mainland China enterprises in raising funds, and provide outlets and risk management for mainland funds, as well as facilitating the mainland’s ongoing financial liberalisation. Apart from strengthening the city’s role in the Greater Bay Area development, it would actively pursue joining the Regional Comprehensive Economic Partnership, a trade alliance of 15 Asia-Pacific nations. Hong Kong’s finance chief vows to keep spending taps on for next budget To develop sustainable financial services, Chan said Hong Kong would leverage the city’s status as a global financial centre to become a green finance trade hub. The city would expand the issuing of green bonds to HK$200 billion, from HK$100 billion. Hong Kong and mainland authorities also want to allow the transborder trading of bonds this year. For some short-term measures, HK$900 million will be allocated to the hard-hit tourism industry, with some of the funds for developing cultural, heritage and creative tourism projects. There will be enhancements in the system of government-guaranteed loans for small and medium-sized enterprises. The borrowing limit for businesses would be raised from HK$5 million to HK$6 million, and the maximum repayment period increased from five to eight years. 6. HK$8 billion budget for national security law This key spending item was not mentioned by the financial secretary in his budget speech. Rather, it was stated in the summary of 1,000 pages of departmental estimates, where it said the amount would be a “non-recurrent appropriation to a special fund to meet the expenditure for safeguarding national security”. Chan was expected to be pressed for more details at a press conference later on Wednesday.

Hong Kong budget: deficit, stamp duty and national security law spending among key takeaways from finance minister’s speech

Financial Secretary Paul Chan warns that city can expect deficit for next few years over recurring expenses linked to Covid-19 Stamp duty to rise on stock trading; Hong Kong to reposition its economy to allow for China factor

Financial Secretary Paul Chan warns that city can expect deficit for next few years over recurring expenses linked to Covid-19

Stamp duty to rise on stock trading; Hong Kong to reposition its economy to allow for China factor