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Hongkongers set for HK$20b in budget sweeteners

Salaries tax rebate and property rates waiver will again be among the sweeteners, while parents will get higher allowances for children

Hongkongers will get sweeteners worth more than HK$20 billion as Financial Secretary John Tsang Chun-wah uses his budget later this month to put cash into people's pockets and stimulate consumption to counter global economic uncertainty.

One-off measures will again include a salaries tax rebate, capped at about HK$10,000, and a waiver on property rates, people familiar with the situation said. Permanent measures will include increasing the tax allowance for parents from HK$70,000 to HK$80,000 per child - the second increase in three years.

The giveaways come a year after Tsang cut sweeteners and warned of further belt-tightening amid projections from a committee of experts that pressure from the city's ageing population would turn healthy government surpluses into a structural deficit in as little as seven years.

But the financial chief has more leeway after the government's performance again beat Tsang's predictions - as it has done every year since 2007. A surplus of at least HK$60 billion is likely for the fiscal year ending next month, six times Tsang's projection. Revenue was bolstered by measures to cool the property market, particularly the doubling of stamp duty to 15 per cent for most transactions.

One of the people familiar with the situation said it would be politically unrealistic to further cut sweeteners, after Tsang reduced the value of one-off relief measures from HK$33 billion to HK$20 billion last year. Instead, giveaways in Tsang's February 25 speech will exceed last year's total.

"When the financial secretary announced the relief measures last year, he made a reasonably optimistic forecast of the economic situation in the coming year," the person said.

"But one year on, there are growing uncertainties in many major economies in the world and growth in Hong Kong's exports remains sluggish. There is a need to stimulate the city's domestic consumption by introducing measures to leave more cash in the hands of the public."

In last year's speech, Tsang predicted economic growth of 3-4 per cent for the year, but that was adjusted to 2.2 per cent in November. Retail sales slumped through much of the year, falling 3.9 per cent year-on-year for December. The value of exports in December was up just 0.6 per cent on the same period in 2013.

A salaries tax rebate of up to HK$10,000 per taxpayer in last year's budget cost HK$9.2 billion. The person said the rebate this year would be about HK$10,000.

One sweetener that could be scaled back is a rent waiver for public housing tenants. One option is to keep the one-month waiver offered last year but exclude some 20,600 wealthier tenants who are required to pay higher rents.

"Excluding well-off tenants from the rent-free period is more acceptable from a political angle, while total abolition of the waiver … would spark a backlash from political parties," the person said.

Tsang's move to increase the sum parents can claim tax-free for each child is a further step towards fulfilling a pledge Chief Executive Leung Chun-ying made ahead of his election.

Tsang increased the allowance from HK$63,000 to HK$70,000 in 2013. In 2012, Leung had promised an allowance of HK$80,000 for the first child and HK$100,000 for all subsequent children.

The rates waiver for private property is again expected to last for two quarters. But there will be no return for the HK$1,800-per-household electricity subsidy, introduced in 2008 and scrapped last year.

 

This article appeared in the South China Morning Post print edition as: Tsang sets up HK$20b budget giveaway
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