Accountant KPMG calls for tax breaks for companies setting up headquarters in Hong Kong
KPMG also calls for allowances to allow mothers to continue working amid declining workforce
Financial Secretary John Tsang Chun-wah was urged on Monday to boost Hong Kong's competitiveness in his forthcoming budget by offering tax incentives to corporations which set up headquarters in the city, and to create allowances to encourage mothers to remain in the workforce or rejoin it.
Accounting firm KPMG polled nearly 400 business executives recently on their expectations for the February 25 budget. It found that more than 40 per cent of respondents thought that the government's priority should be the city's competitiveness, followed by livelihood and housing issues.
More than half of the respondents said the government should focus on stimulating economic growth to increase tax revenues in a bid to overcome a possible structural deficit. Government fiscal advisers warned last year that the city could face a deficit of HK$1.54 trillion by 2041.
To boost competitiveness, KMPG said profits tax should be reduced to 14.5 per cent for companies setting up headquarters in Hong Kong. The current rate is 16.5 per cent.
The firm is also predicting that the government will record a budget surplus of HK$65.5 billion for the current fiscal year, which ends on March 31. This is significantly higher than the administration's initial estimate of HK$9.1 billion, though KPMG said it was too early to say how last year's Occupy protests would affect government revenue.
However, the projected budget surplus will drop to HK$38.5 billion after HK$27 billion is allocated to a new housing reserve fund, which will be used to help meet the government's goal of building 290,000 public flats in the next decade.
KPMG partner Ayesha Macpherson Lau said the bigger than expected surplus would result from the collection of more stamp duty and profits tax.
She also called on the government to introduce a working mother's allowance of HK$70,000 and a caregiver's allowance of HK$20,000 to encourage women to rejoin or stay in the workforce.
"If somebody was at home, for example their parents, to take care of their children, they would not worry about rejoining the workforce," Lau said.
Lau also urged the government to roll out a HK$60,000 allowance for each newly-wed in the first year of their marriage to encourage more marriages and boost the birth rate amid an ageing population and a dwindling workforce.
To help the younger generation to buy their first flat, Lau said the government should halve stamp duty for property transactions worth HK$4 million or less.
She also proposed raising the transport subsidy for low- income workers by HK$100 to HK$700 to encourage more people to work.