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Hong Kong Budget 2015-2016
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(From left) Permanent Secretary for Financial Services and the Treasury Elizabeth Tse Man-yee, Financial Secretary John Tsang Chun-wah, Secretary for Financial Services and the Treasury Chan Ka-keung and Government Economist Helen Chan, pose for photos before addressing a press conference following Tsang's budget speech at Central Government Offices, Tamar. Photo: Sam Tsang

BUDGET LIVE 2015: Child allowance up, salaries tax down as John Tsang announces sweeteners

Finance Secretary John Tsang this morning unveiled his keenly-awaited budget for 2015, with a raft of sweeteners to put cash into people's pockets in an effort to boost consumption.

Finance Secretary John Tsang this morning unveiled his keenly-awaited budget for 2015, with a raft of sweeteners to put cash into people's pockets in an effort to boost consumption.

A salaries tax rebate, increased tax allowance for parents and a waiver on property rates were all included, as Tsang revealed a surplus of HK$63 billion. Here's how it unfolded:

CONCLUSIONS

Tsang is concluding his speech, recalling the “social bickering” of the past year.

He says: "Hong Kong's success has been built on our sound social system and shared values over the decades. People here have different opinions, different likes and dislikes, and different faiths. But, we can still live together harmoniously and our society can still operate effectively. However, events in recent years seem to have impacted on the system and common values. This is huge concern to me.”

Conflicts, he says, should be resolved through conversations, not confrontation. “I am never afraid of an argument or debate as long as they are constructive. If not, then we are just wasting our time without doing any good for Hong Kong."

Tsang says Hong Kong ranks in the top tier globally for its economic success. “However, behind and beyond material fulfilment, the people of this city, our younger generations in particular, are hungering for spiritual contentment. This is what a mature society should manifest, and this is a change that needs to be addressed and dealt with. Nonetheless, conflicts should be resolved through conversation rather than confrontation, and this is the point that we all must come to terms with.”

READ MORE: For all the latest budget news and analysis, click here

He ends by saying the onus is on the younger generations who will not just enjoy the good fruit planted by their predecessors but will work hard for tomorrow’s harvest.

“I hope that they will continue to sow the seeds, plough the land and plant the trees so their future generations can enjoy the fruits of their labour. Our vision is to make this city a better place with a brighter future for everyone where our legend lives on.”

BUDGET SURPLUS

Tsang discloses a budget surplus of HK$63.8 billion for the fiscal year ending next month - six times higher than his projection from last year. 

By 31 March 2015, fiscal reserves are expected to reach HK$819.5 billion, he reveals.

HIs surplus forecast for next year is HK$36.8 billion.

GOODS AND SERVICES TAX?

Tsang says the Government "may explore again the feasibility of broadening the tax base in due course with the aim of stabilising government revenue and creating room for direct tax concessions". He makes this point after stating that an extensive consultation in 2006 on the introduction of a Goods and Services Tax was not supported by the community.

FUTURE FUND GETS ROLLING

Tsang says he has agreed to establish a Future Fund and has asked the Secretary for Financial Services and the Treasury to work with the HKMA to hammer our specific management and investment mechanisms. He expects a savings scheme to be in place within the year.

The Future Fund was conceived by last year by the Working Group on Long-term Fiscal Planning. It suggested an endowment fund of $220 million from the Land Fund, which is part of the fiscal reserves and a proportion of future budget surpluses. The Fund will serve as long-term savings and be put into long-term investments for higher returns.

DEFICIT

Tsang warns that at the current rate of spending, Hong Kong will run into a deficit in 10 years. He is asking all departments to reduce spending.

The Government must stabilise and broaden its revenue base if future spending is to be supported, says Tsang.

"We need to take early and positive actions to contain expenditure, preserve the revenue base and save up in a timely manner to avoid the appearance of structural deficits."

ENCOURAGING EMPLOYMENT

Tsang says he will allocate HK$130 million to strengthen child care services, thus providing support for women to achieve a work-family balance. On the job training for the middle-aged will be extended to encourage the employment of older people into part-time jobs.

He also sheds more light on the HK$50 billion fund he had earmarked in the 2008-9 budget to support healthcare reform, an issue that ageing-support advocates had been pressing the government on. “I shall, in light of public views, inject funds into the high risk pool under the Voluntary Health Insurance Scheme, and provide tax concession for subscribers to regulated insurance products.”

RESIDENTIAL LAND

The government is considering launching a new Premium Loan Guarantee Scheme to help owners of subsidised sale flats pay the premium to HKHA or HKHS.

“After settling the premium payment, owners will have greater flexibility in disposing of their flats, such as letting out or selling the flats in the open market,” says Tsang. The lack of loan schemes has in the past hampered those seeking to buy flats and move out of rental housing.

AID FOR UNDERGRADUATE TRAINING

The Government will spend HK$960 million to subsidise on a pilot basis 1,000 students per cohort to pursue designated self-financing undergraduate programmes. For the first cohort, there will be 13 programmes, covering health care, architecture and engineering, testing and certification, creative industry, logistics, as well as tourism and hospitality.

“We shall open up more internship and exchange opportunities for young people to experience the taste of work, broaden their exposure, and be prepared for entering the job market.” Says Tsang

CLEAN AIR

* "We shall introduce legislation this year to require all ocean going vehicles at berth in Hong Kong to use low sulphur diesel."

* "Government will phase out 82 000 Euro III or earlier diesel commercial vehicles by the end of 2019."

* "We shall allocate an additional HK$150 million to extend the Cleaner Production Partnership Programmee for five years."

* "We plan to commission a new consultancy study on enhancing the leisure and recreational value of the coastal areas of Victoria Harbour in the long run."

* "We shall start working on the design of a desalination plant at Tseung Kwan O and the associated infrastructure in phases this year."

MANPOWER SHORTAGE

Tsang says that the skills mismatch in the labour market has become more evident in recent years and that a chronic manpower shortage and recruitment difficulties in individual sectors will hamper the sustainable and diversified economic development.

He says: “We should seriously consider importing manpower in an appropriate, limited and targeted manner to inject new impetus into the labour market." He gives no further details on this front.

More help for manpower training in several sectors is announced. He will provide another HK$100 million to the Construction Industry Council to train local workers through training allowances and on-site training. He will allocate HK$100 million for a three-year pilot scheme for insurance and asset and wealth management services. 

iBONDS

"The inflation-linked retail bonds (iBond) introduced in 2011 have been well received by the public and helped promote the retail bond market.  I shall launch an iBond issue of up to HK$10 billion with a maturity of three years. The issuance will target Hong Kong residents, and interest will be paid to bond holders every six months at a rate linked to the inflation rates of the last half-year period."

TAX EVASION

Hong Kong will step up its efforts in combating cross-border tax evasion, Tsang pledges.

"In response to the Organisation for Economic Co-operation and Development, we have pledged to adopt the new standard, pursuant to which financial institutions are required to report to the Inland Revenue Department specified financial account information on a regular basis, so that Hong Kong can exchange such information with other jurisdictions by end-2018. We shall consult the industry in the second quarter of this year and introduce the relevant amendment bill in 2016."

FINANCIAL SERVICES

"Hongkong’s role as the world’s largest centre for offshore RMB banking, financing and asset management has grown significantly. Last year, RMB trade settlement conducted through Hong Kong banks amounted to RMB 6.3 trillion, with a 60 per cent year-on-year increase, while RMB bond issuance amounted to RMB 200 billion, with a 70 per cent year-on-year increase.

"In the fourth quarter of 2014, the average daily turnover on Hong Kong's RMB Real Time Gross Settlement (RTGS) system amounted to RMB 850 billion, representing an 80 per cent increase over the same period a year earlier.

“We shall continue to actively develop Hong Kong's capacity to serve as a global hub for offshore RMB business, providing new opportunities for the financial sectors both in the Mainland and Hong Kong. To this end, we shall work with the Mainland authorities to further increase our investment quota for the RMB Qualified Foreign Institutional Investors (RQFII) Scheme and strive for early implementation of the arrangement for mutual recognition of funds.”

The Government plans to table a bill in Legco to allow private equity funds to enjoy profits tax exemption available to offshore funds.

"To attract multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong to perform treasury services for their group companies, the Government will amend the Inland Revenue Ordinance to allow, under specified conditions, interest deductions under profits tax for corporate treasury centres and reducing profits tax for specified treasury activities by 50 per cent. The bill will be introduced in the new session," Tsang says.

MAINLAND AND HONG KONG CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT (CEPA)

Tsang says he hopes the Mainland will further deepen liberalisation measures embarked on this year with Guangdong and Hong Kong and “extend them nationwide, thereby achieving basic liberalisation of trade in services between the entire Mainland and Hong Kong by the end of this year".

TOURISM

Get ready for an amped-up Disneyland: The Government will discuss with the Walt Disney Company the Phase 2 development of the Hong Kong Disneyland Resort. This phase will cover an estimated area of 60 hectares, similar to that of Phase 1, with attractions, hotel development and retail facilities.

New hotel projects in Hong Kong Disneyland, Ocean Park and the airport's North Commercial District will come on stream, providing more than 2,200 rooms. Ocean Park has also invited expressions of interest for the development of the proposed Fisherman's Wharf Hotel.

Furthermore, sites facing Victoria Harbour within the "hotel belt" adjacent to the Kai Tak Cruise Terminal will be made available to the market starting from the end of this year.

THIRD RUNWAY

Tsang on the three-runway system: “With rising passenger and cargo throughput at the Hong Kong International Airport, the existing two-runway system will reach its maximum capacity in a few years. It is imperative for us to take forward the development of a three-runway system (3RS) in order to meet our long-term air traffic demand, and to maintain our status as an international and regional aviation centre in the face of fierce competition from other airports in the region.

"Having gone through the environmental impact assessment process, the Airport Authority (AA) has submitted its recommendations on the planning of the 3RS to Government.”

Signalling his support for the three-runway system (3RS), Tsang says that he envisages that construction for the 3RS could start next year and be ready by 2023. The authorities estimate that when fully operational, the airport can handle 100 million passengers and 9 million tonnes of cargo annually by 2030.

FASHION, FILM AND ARTS

FASHION: I shall consolidate the existing resources and invest new resources, totalling HK$500 million, to launch a series of measures on a pilot basis in the next three years. 

FILM: I shall make a further injection of HK$200 million into the Film Development Fund, enhance its funding arrangements and introduce a subsidy scheme for film productions with a budget not exceeding HK$10 million, subject to a subsidy ceiling of HK$2 million.

ARTS: I shall launch a HK$300 million Art Development Matching Grants Pilot Scheme, under which the amount of private donation and sponsorship secured by eligible local arts groups will be matched by grants.

RENTAL MEASURES

The Government will pay one month's rent for lower income tenants living in the rental units of Hong Kong Housing Authority (HKHA) and the Hong Kong Housing Society (HKHS). But better off tenants on the HKHA and non-elderly tenants of the HKHS Group B estates will not be entitled to this benefit.

OLD AGE/DISABILITY ALLOWANCE

The poor on the Comprehensive Social Security Assistance (CSSA) scheme will get more help, in the form of two extra months of payments. Similarly, the elderly who are on the Old Age Allowance and those on the Disability Allowance will get an extra two months of payment. 

CHILD ALLOWANCE

Child tax allowances will be raised yet again, from HK$70,000 to HK$100,000 from 2015-16 onwards. The move marks the fourth year of increases to meet the concerns of parents bringing up young children.

John Tsang gives his 2015 budget speech. Photo: SCMP

Salaries tax and tax under personal assessment for 2014-15 will be reduced by 75 per cent, subject to a ceiling of HK$20,000. This proposal will benefit 1.82 million taxpayers and reduce Government revenue by HK$15.8 billion.

Tsang also announces a reduction in profits tax for 2014-15 by 75 per cent, subject to a ceiling of HK$20,000. The reduction will be reflected in the final tax payable for 2014-15. This proposal will benefit 130,000 taxpayers in the territory and reduce government revenue by HK$1.9 billion.

Stimulus measures will boost GDP by 1 percentage point, says Tsang.

ECONOMIC OUTLOOK FOR 2015

Gross Domestic Product (GDP) growth forecast at one to three per cent in 2015.

I forecast that the headline inflation rate for 2015 as a whole will be 3.5 per cent with an underlying inflation rate at three per cent.

RELIEF MEASURES POST-OCCUPY

(a) waive the licence fees for 1,800 travel agents for six months;

(b) waive the licence fees for 2,000 hotels and guesthouses for six months;

(c) waive the licence fees for restaurants and hawkers and fees for restricted food permits for six months, benefiting 26,000 restaurants and operators in total; and

(d) waive the fees for vehicle examination once for the renewal of vehicle licences of taxis, light buses, franchised and non-franchised buses, goods vehicles, trailers and special purpose vehicles within a year.

The Hong Kong Tourism Board will also get an additional HK$80 million to step up promotion efforts in the coming year.

INTRODUCTION

Financial Secretary John Tsang begins by wishing members of Legco “good health and happiness” in the Year of the Ram.

"Momentous events, local and global, changed the lives of many and transformed our city.  Events are still unfolding, and will require our close scrutiny.  But, one thing is for sure – a totally different environment has emerged which presents new challenges ahead," he says, adding: "Locally, with constitutional reform entering the next stage, we anticipate that disputes, both inside and outside the Council, will become even more vehement this year."

Tsang reveals the economy grew only by 2.3 per cent last year.

The unemployment rate averaged at a low level of 3.2 per cent for the year as a whole.

The headline inflation rate for 2014 was 4.4 per cent.

In relation to Occupy Tsang says he will announce an array of target measures to help sectors - including retail, restaurants and tourism - affected by the 79-day protests.

10.55am: While the Democrats have urged the government to offer more sweeteners to Hongkongers, such as providing a rent waiver for public housing tenants and electricity subsidy to the public, advocacy groups are also calling on Tsang to set up a HK$50billion seed fund for the introduction of a universal retirement protection scheme.

Bureau chiefs have shown their cabinet's unity via their choice of ties today. Ministers such as transport and housing chief Professor Anthony Cheung Bing-leung, commerce chief Greg So Kam-leung, constitutional and mainland affairs chief Raymond Tam chi-yuen have all wearing purple ties - the theme colour of this year's budget.

10.45am: Protesters from various political parties and advocacy groups are gathered outside the legislature, calling for the government to make good use of the surplus to benefit citizens from all classes. John Tsang has arrived. His speech is due to begin in 10 minutes.

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