A top accounting firm urged the government to offer more tax concessions and relief measures in the budget as it forecast a surplus of up to HK$28.7 billion in the current financial year, thanks to a windfall from land sales.
PricewaterhouseCoopers said land revenue would be boosted by HK$20 billion in the first quarter of this year. It expects profits and salaries tax to bring in about HK$165.9 billion, while revenue from stamp duty would fall from HK$44.4 billion to HK$37.8 billion. It also expects fiscal reserves to reach HK$697.8 billion - equivalent to 21 months of government spending.
Financial Secretary John Tsang Chun-wah will review his forecasts for the 2012-13 financial year in his budget speech to be delivered next month.
The firm also proposed incentives to encourage owners to use environment-friendly vehicles and machinery to cut pollution. "Given diesel commercial vehicles are the main source of roadside pollution, the government should introduce 30 per cent incentives for replacing pre-Euro and Euro 1 and II diesel commercial vehicles," said Jeremy Choi Heng-chio, PwC Hong Kong tax partner, referring to European emission standards introduced in 1992 and 1996.
The government should also provide a 200 per cent tax deduction on environment-friendly machines and installations, he said. Among other measures, PwC suggested a profits tax exemption for all short, medium and long-term bonds and expansion of the current profits tax exemption for foreign funds to Hong Kong resident funds and private equity funds.
PwC estimated the full-year surplus would reach HK$28.7 billion, the most optimistic assessment among major accounting firms. Ernst & Young put it at HK$8.6 billion while Deloitte estimated a deficit of HK$10 billion.
PwC tax partner So Kwok-kay said most of the surplus would be accounted for by record income from land sales. The firm did not favour another cash handout like the HK$6,000 given last year but believed relief measures would be introduced to address livelihood, land and inflation issues.