It is designed to encourage parents to invest in their children's schooling, but a family association says it is just 'token relief' Parents will be up to $2,000 a year better off for each child they have with the decision to raise the tax allowance on children by $10,000. About 300,000 taxpayers will benefit from the increase in child allowance, which will cost the government $620 million a year. Taxpayers supporting parents or grandparents aged 55 to 59 will be allowed to set up to $30,000 a year against tax. Around 100,000 taxpayers will benefit, at a cost to the government of $450 million a year. At present, only taxpayers caring for dependent parents or grandparents aged 60 or above enjoy tax allowances. Henry Tang Ying-yen proposed increasing the child allowance from $30,000 per child to $40,000 in the 2005-06 financial year. A parent paying the top marginal tax rate of 20 per cent will save $2,000 per child a year. Mr Tang said his proposal was intended to encourage parents to invest in their children's education, and create more room for fee-paying schools. But a parents' association dismissed the increased tax allowance as 'token relief', saying an increase in the subsidies for pre-school education would do more to ease the burden on parents. The financial secretary said: 'I understand that Hong Kong people have high expectations of their children and attach great importance to their education. The cost of living is rising, so the burden of raising children is rather heavy.' The number of schools under the Direct Subsidy Scheme had increased in the past few years, he noted. They enjoy greater autonomy than fully aided schools, including the discretion to charge tuition fees while receiving government subsidies linked to student numbers. 'I hope we can strike a balance between fully aided schools and fee-paying institutions in the long run. We would also like to create more room for fee-paying schools,' Mr Tang said. He acknowledged that some people had called on the government to offer tax concessions for children's education. 'I believe that increasing the child allowance is a simpler and more flexible way of easing parents' financial burden.' He said his proposal had not been prompted by the government's call on couples to have three children to boost the birth rate. Leung Chung-wan, chairman of the Hong Kong Parents Association, said the increase in child allowance would not do much to ease the burden on parents. 'The heaviest financial burden on parents is education in early childhood, which receives little government subsidy. Increasing the government subsidy to kindergartens would ease parents' burden more effectively,' he said. Mr Tang proposed that taxpayers supporting parents or grandparents aged 55 to 59 be granted a basic allowance of $15,000 a year. They will be entitled to twice that if their elderly relatives live with them. 'Because the unemployment rate for older workers is still relatively high, the younger generation will inevitably have to undertake a heavier responsibility in caring for their parents.'