Deloitte China forecasts HK$50.3 billion fiscal surplus

Accounting firm Deloitte says a jump in land revenues means government will be flush enough to fund sweeteners in next budget

PUBLISHED : Tuesday, 28 January, 2014, 12:49pm
UPDATED : Wednesday, 29 January, 2014, 3:55am

The government will see a HK$50.3 billion surplus by the end of March, largely because of an HK$18 billion increase in land-premium revenues, a leading accounting firm estimated yesterday.

Deloitte's latest prediction was HK$20 billion higher than its estimate in November, when it forecast only a HK$29.9 billion surplus, expecting land-premium revenues to decrease in the second half of the fiscal year.

The accounting firm yesterday called for the administration to offer a series of tax incentives when Financial Secretary John Tsang Chun-wah announces the budget on February 26. They include sweeteners for the middle class, such as waiving 75 per cent of the salaries tax - subject to a HK$12,000 ceiling - as well as stamp duty deductions for those buying a home for the first time.

"First of all, we hope [the government will seek] to develop Hong Kong's economy," said the firm's vice-chairwoman, Yvonne Law Shing Mo-han.

"We also [want] support for needy and middle-class families and salary taxpayers."

Apart from tax waivers, the firm also proposed raising the basic tax allowance from HK$120,000 to HK$126,000, as well as increasing child and dependent-parent allowances by about 10 per cent, to HK$77,000 and HK$42,000, respectively.

To ease the burden on homeowners and tenants, the firm suggested that besides tax deductions for mortgage-loan interest, homebuyers should also be able to a claim a deduction for the mortgage principal, capped at HK$100,000 a year with a limit of 20 years.

First-time local buyers should be allowed a deduction for the stamp duty paid on the purchase, also with a HK$100,000 cap.

"We don't have a scientific definition of 'middle class', but generally we have heard residents saying that they have been spending a lot on housing matters, so we believe that the budget should target them and help them," said Davy Yun, a tax partner at Deloitte.

To boost the city's business competitiveness, Deloitte suggested lowering the profits tax rate from 16.5 per cent to 16 per cent, introducing a corporate allowance of HK$200,000 for limited companies, and additional tax incentives for new regional headquarters, to encourage foreign firms to set up their base in Hong Kong.

Deloitte said it believed that developing the economy would help increase the government's tax revenue in the long run, and if its recommendations were implemented by the finance chief, the government could still see a budget surplus of HK$43 billion in the next financial year, which starts in April.

Earlier this month, the Taxation Institute, which represents 2,700 taxation professionals, estimated a government budget surplus for this fiscal year of HK$20 billion.