Hong Kong Budget 2018-2019

Hong Kong has sped up a tax break for green buildings, but environmentalists are unimpressed

Green groups say effects will be minimal, especially compared with upcoming ‘feed-in tariff’ scheme

PUBLISHED : Friday, 02 March, 2018, 8:34am
UPDATED : Friday, 02 March, 2018, 8:34am

A change that speeds up a tax break for companies investing in greener buildings got a lukewarm response from environmental groups on Thursday.

The move – though “better than nothing” – would have minimal impact compared to the government’s upcoming “feed-in tariff” scheme, which is designed to incentivise private investment, the groups said.

In the 2018-19 financial year, tax refunds for cash spent on energy efficient building installations and renewable energy devices can be claimed in the year of purchase, rather than over the following five years, as currently. The quicker pay-off, the government said, would make the investment more appealing to companies.

The revised concession was one of a few environmental measures announced in Financial Secretary Paul Chan Mo-po’s budget on Wednesday.

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Chan also announced another HK$800 million this year to promote the installation of renewable energy facilities at government buildings, venues and community facilities.

“Providing an enhanced tax incentive for renewable energy and energy-efficient building installations will further encourage adoption of renewable energy and energy saving in the community,” Secretary for the Environment Wong Kam-sing said on Thursday.

According to the Inland Revenue Department, buildings can apply for a deduction on profits tax for 20 per cent of cash spent on certain environmentally friendly installations, including renewable energy installations.

Olivia To Pui-wai, WWF-Hong Kong’s assistant project manager for sustainability, said the change would have limited impact as most businesses were probably not even aware of the concession.

It’s not like they are increasing the tax concession. It’s strange that they can’t do more for renewables
Olivia To

The breaks have been available since the 2008/09 fiscal year, but have piqued limited public interest.

About 20 applications for deductions were made in the first five years, according to government statistics provided to the Legislative Council last year. In 2015/16, only nine were made, with total deductions of HK$25.1 million.

“It’s not like they are increasing the tax concession. It’s strange that they can’t do more for renewables,” To said.

There is no official breakdown of the amount of tax deductions by type of installation.

Frances Yeung Hoi-shan, senior campaigner at Greenpeace East Asia, said: “It’s better than nothing but it won’t really do much to spur renewable energy.”

“The feed-in tariffs will be the crucial change we are waiting for. It is the only thing that can help shorten the return periods of renewable energy investment,” she said.

Feed-in tariffs allow electricity produced renewably by businesses and homes to be sold at a rate higher than the normal electricity tariff rate, to cover the cost of their investments. The most basic of rooftop solar energy projects currently have return periods of about 20 to 30 years.

It is understood that the Environment Bureau will announce the feed-in tariff arrangements with two power companies next month, and that the system will have more than one rate, based on the scale of each individual project.

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The Green Building Council, a non-profit group that promotes sustainable buildings, said it welcomed the tax tweak, saying it provided a strong financial incentive for projects, in particular existing buildings, to improve energy efficiency.

It would also bring Hong Kong closer to meeting its reduction target for energy intensity – the quantity of energy needed to produce one unit of GDP – by 40 per cent by 2025, the council said.