A "steady-as-we-go" budget
In presenting his first budget address last month, the Financial Secretary Mr. Paul Chan may be forgiven for assuming the guise of a caretaker, faithfully repeating many of the mantras that were the hallmark of a predecessor currently seeking an alternative position. There were however a few hopeful signs that, given time, the caretaker may turn out to be a visionary, a transformer of fiscal policy, or at least be more proactive than his predecessor.
This being the last budget of the current administration, may have been a further factor limiting the scope for imagination or moves to a brave new fiscal landscape. Indeed, Mr. Chan noted that he dare not boast that he could open up a new world for Hong Kong by one budget alone. Maybe two? This will of course depend, to a degree, on the outcome of the upcoming Chief Executive race.
Thus Mr. Chan delivered the usual budget items, warning of an uncertain global political and economic climate, the challenges of a rapidly ageing population, the need for spending only when necessary and adhering to strict fiscal discipline. In turn, he was met with the usual opposition and expulsion of lawmaker(s) demanding that the Financial Secretary open his purse wider. Also making their regular appearance were the candies, the so-called “sweeteners”, designed to return to an ever expectant society some of this year’s budget surplus.
There were however indications that if Mr. Chan is still the Financial Secretary in 2018, he will review Hong Kong’s tax system more broadly, its competiveness internationally and its narrow base. These are issues which various professional bodies and tax advisers have long stressed require immediate attention.
The Financial Secretary’s announcement of the creation of a tax policy unit in the Financial Services and the Treasury Bureau to “comprehensively examine” these issues is a first step in the right direction. Commentators will wait with interest to learn how the Financial Secretary proposes to enable the public and various interested bodies to put forward their ideas for the consideration of the tax policy unit.
Overall, when delivering his first budget, Mr. Chan probably had little room to maneuver, chose the safe option of acting as caretaker and delivered a budget that addressed the usual areas and returned to an expectant public a certain portion of the prior year’s surplus.
That said, Mr. Chan’s pledge to broadly review Hong Kong’s tax system is new. Should he remain Financial Secretary in 2018, commentators will judge him more closely with reference to both the degree of input they are allowed to the review process conducted by the tax policy unit and the quality of its output.