Stamp duty helps Hong Kong coffers swell by record HK$328.6 billion
Taxman has record-breaking year, with department forecasting 4 per cent rise in revenue in 2018-19
Hong Kong’s tax revenue swelled to a record high of HK$328.6 billion in the financial year 2017-18, up 13 per cent on the previous year’s taking, thanks to an upsurge in stamp duty revenue, which went up 54 per cent to HK$95.2 billion.
The record-breaking tax revenue also reversed a downward trend for the past two financial years. In 2016-17, the taxman collected about HK$290 billion, down from the HK$291 billion for 2015-16, and about HK$302 billion in 2014-15.
Of the total collected, 42 per cent, or HK$139 billion, was from profits tax, while salaries tax accounted for about HK$60.8 billion.
Revenue from stamp duty, which is charged on property transactions and share trading, grew by HK$33.3 billion from 2016-17 to HK$95.2 billion. Of that amount, some HK$57.4 billion came from property transactions.
Sales in 2017-18 went up by about 30 per cent to 55,000 transactions.
Business registration fees amounted to HK$2.73 billion, almost 12 times the figure for 2016-17, mainly because of the expiry of the government’s one-year waiver of the fees.
Commissioner of Inland Revenue Wong Kuen-fai forecast total tax takings in 2018-19 of HK$342.3 billion, a 4 per cent year-on-year increase, despite an estimated 10 per cent drop in salaries tax.
“With the new tax allowances and concessions announced in the budget, we expect the revenues from income tax will fall a bit. Our estimate is HK$54.8 billion for 2018-19,” Wong said.
About 1.43 million private flats in Hong Kong won’t be subject to property tax next year, as part of budget relief measure
Wong declined to speculate on the outlook of the property and stock markets but, according to his department’s estimates, stamp duty revenue for 2018-19 will rise 5 per cent to about HK$100 billion, accounting for about 30 per cent of the total collected for 2018-19.
And property tax is expected to go up by 4 per cent, to HK$3.6 billion.
Financial Secretary Paul Chan Mo-po proposed a series of tax concessions in his budget in February, including one-off rebates of salary and profits taxes of 75 per cent. He also suggested widening and increasing the number of salary tax bands, as well as higher allowances for children and dependent parents and grandparents.
To honour the election pledge of Chief Executive Carrie Lam Cheng Yuet-ngor, Chan also announced a two-tier profits tax rates regime in his budget, under which the rate for the first HK$2 million of earnings would be lowered to 8.25 per cent, compared with the current 16.5 per cent, while profits above that level would continue to be 16.5 per cent.
Wong expected corporations to benefit from the robust economy, and corporate tax revenue for 2018-19 was forecast to go up by 12 per cent to HK$155.1 billion.
Baptist University economist Dr Billy Mak Sui-choi, who is also the associate director of the institution’s centre for corporate governance and financial policy, said the account of the revenue collections presented by the tax department showed Hong Kong’s tax base was too narrow.
“With the government having record tax revenue and surplus, it should be time to think about widening the tax base, like introducing a sales tax,” said Mak, who was quick to add: “It is of course more a political issue than an economic issue.”
Mak also said the tax department might be too optimistic about the economic outlook, given the expected US interest rate increases, and the looming trade friction between China and the US.
“A rise in bank interest rates could cool property and stock markets, and a trade war could affect corporates’ profits,” he said.
Meanwhile, the tax chief also asked the city’s 2.6 million taxpayers to look out for the “green envelopes” in the next couple of days. They will have to file their tax returns by June 2, with an extra month for those who do it online.