Financial secretary John Tsang misjudges budget surplus again

Financial results show an excess of HK$40b in coffers, which is far off the $3.4b deficit estimate

PUBLISHED : Friday, 01 February, 2013, 12:00am
UPDATED : Friday, 01 February, 2013, 4:17am

The government has yet again underestimated its budget surplus, according to financial results for the nine months to December 31.

In his budget in February last year, Financial Secretary John Tsang Chun-wah estimated that Hong Kong would suffer a deficit of HK$3.4 billion in the consolidated account for the 2012-13 financial year. But for the nine months to December 31, the government is already seeing a surplus of HK$40 billion.

In the first nine months of 2010-11 and 2011-12 financial years, the government had a surplus of HK$59 billion and HK$59.5 billion, respectively. The amounts snowballed to HK$75.1 billion and HK$73.7 billion for the two years, respectively.

Experts say another surplus instead of a deficit will be seen for the financial year to March 31, with their estimates ranging from HK$10 billion to HK$70 billion.

The dean of the school of business at Hang Seng Management College, Raymond So Wai-man, and lawmaker Ronny Tong Ka-wah are expecting a figure towards the higher end.

"The government had expected a poor external environment," said So, who was referring to the European debt crisis and US fiscal cliff. "It's also hard for the government to estimate its revenue arising from land sales, investment and stamp duty."

Although the government said it would not offer cash rebates in the budget on February 27, the economist said it would now be under huge pressure to hand out "sweeteners".

Tong said that since the handover, the government had usually underestimated its budget balance by HK$35 billion to HK$40 billion. In the last financial year, the underestimation amounted to HK$69.8 billion. "It is something deliberate," he said, adding the government may have wanted to create a grim outlook to dampen the property market.

The big surplus also suggests the government constantly spends too little, he said.

"It should spend more on the medical field," he said. "The waiting time for services is too long, and hospitals are understaffed."

The Democratic Party, which also expects a hefty surplus, demanded short-term relief measures including a tax rebate and waiving of rates.

But Jennifer Wong Wan How-yee, tax partner of KPMG China, predicted that the surplus would drop to HK$10 billion in the remaining months.

Most revenue came from profits tax paid by corporations in November, which was already booked by the government, she said. Individuals pay their salaries tax this month, but the relatively small sum will not cover expenses for the rest of the quarter.

Although a surplus is expected, the resumption of construction on Home Ownership Scheme flats would be costly for the government, she said.