Think of the budget as the government’s shopping list for the coming year and an indicator of the city’s financial health. Here are five key points to look out for in this year’s speech.
Hong Kong’s annual budget is an important announcement – and not just because you may get to pay lower taxes. Think of the budget as the government’s shopping list for the coming year and an indicator of the city’s financial health. Here are five key points to look out for in this year’s speech.
Hong Kong and Greece are leagues apart in terms of budgets. Greece is heavily in debt, and Hong Kong has had a budget surplus for the past decade. In 2011, Hong Kong could even afford to hand out HK$6,000 to residents.
But while that’s the case now, Hong Kong’s population is getting older. By 2041, one in three people will be 65 or older. That means the government has to spend more on health care and social welfare.
Greeks gather in front of parliament during an anti-austerity and pro-government demonstration in Athens. Photo: Reuters
A government working group said that if Hong Kong keeps spending as much as it does and does nothing about the ageing population, the city could be as heavily indebted as Greece by 2041. Specifically, they project a deficit of HK$1.54 trillion by then. When that report came out last March, Financial Secretary John Tsang Chun-wah said he didn’t think the working group’s prediction was pessimistic.
Chief Executive Leung Chun-ying said he’ll address the ageing population and find ways of growing the economy. Last month, he also announced government programmes, like an allowance for low-income working families and an innovation and technology fund to boost research and development. Those measures come with a HK$10 billion price tag in taxes per year.
According to an unnamed government official, the financial secretary replied, saying the potential deficit is a big deal and that we shouldn’t be spending this much right now.
The ageing population is a problem that goes beyond the budget. Hong Kong doesn’t have nearly enough government homes for the elderly. The waiting list is nearly three years long, and last year, more than 5,000 elderly people died while waiting for a spot. After Japan, Hong Kong has the fastest ageing population in Asia.
If you’re involved in any kind of trade, profession or business that makes a profit in Hong Kong, you have to pay taxes. It doesn’t matter if you live here or not. The rate for businesses is 16.5 per cent. That’s where the Hong Kong government gets most of its money.
Hong Kong has to compete against mainland cities like Shanghai and Beijing for business, as well as regional rivals like Singapore. The mainland cities get a lot more revenue from profits tax than Hong Kong does, but accounting firm Deloitte says the government should think about setting up a two-tier tax system by taxing the first HK$2 million in profits at a lower rate of 12 per cent – the kind of system Singapore has.
Singapore is ranked second and Hong Kong seventh on the World Economic Forum’s Global Competitiveness Index. Competitiveness is a big deal for the Hong Kong government and the financial secretary made it his theme for last year’s budget.
Singapore has a two-tier tax system. Photo: AFP
Charities can apply for a grant from the Lotteries Fund. The government set up the fund in the 1960s to pay for welfare projects. In fact, back in 1994, a legislator said that people play the Mark Six partly to win, and partly because they think it’s a charitable donation. For each bet placed on the Mark Six, 15 per cent goes towards a fund managed by the Social Welfare Department. That’s augmented by auctioning car license plates and investments. Last year, the fund was worth HK$21 billion.
Last month, the chief executive said he would put an extra HK$10 billion in the fund for expanding and renovating homes for the elderly and rehabilitation centres. As we said, the population is ageing.
Playing the Mark Six means donating to charity too. Photo: Sam Tsang
Again, think of the budget as the government’s shopping list for the coming year. Along with the budget, the government releases a list of establishment numbers, which lists how many employees departments have, and an estimate of how many they will have at this time next year.
For the past few years, most government departments have hired more employees. This year, we may see a particular spike in recruitment for police officers.
Following Occupy Central protests last year, security sources say the police force does not have enough officers. Several anonymous sources from the force said dealing with the protests stretched their manpower, and officers had to be drafted from units across Hong Kong. One source said the plan would involve 500 new office posts. The police lack officers in other departments too. For example, the unit that fights money laundering only had 50 investigators last year to take on 37,000 potential cases, which means each investigator had to take 740 potential cases.
Expect the police force to be bolstered following Occupy. Photo: Sam Tsang
After the financial secretary gives his budget speech, the plan still has to win approval at the Legislative Council. The financial secretary will introduce an appropriation bill (how the government wants to spend its money) to the council, where lawmakers will debate it until they decide on a version they will pass.
That has not been easy in the past two years.
Before the last two budgets were passed, radical lawmakers filibustered the bill, meaning they flooded it with amendments as a stalling tactic in an attempt to get what they wanted. In 2013, lawmakers added more than 700 amendments to try and push for a universal pension, leading to a month-long filibuster. The budget was finally passed in late May after the Legco chairman ended the debate.
The lawmakers tried again last year with more than 1,500 amendments. That led to 130 hours of negotiations, which ended in June when the Legco chairman used a rule to force a vote on the budget. Let’s see if it goes any quicker this year.
Lawmaker Leung Kwok-hung is expelled from the Legco chamber last year as the budget bill was passed. Photo: K. Y. Cheng
The budget tells you how much revenue the government collected in the past year. From 2013 to last year, the government earned HK$455 billion. Hutchison Whampoa earned HK$412 billion in total revenue in 2013.
