Top Hong Kong accountants’ body urges government not to give out cash handout in budget as it estimates surplus of HK$50 billion for financial year
- Hong Kong Institute of Certified Public Accountants says big drop in land sales and stamp duty have reduced surplus
- Calls for tax break of up to HK$100,000 for those who rent residential property
Big drops in land sales and stamp duty have reduced the government’s annual surplus to around HK$50 billion (US$6.4 billion) this financial year, the Hong Kong Institute of Certified Public Accountants forecast on Monday, as it called for a cash handout scheme not to be renewed.
The institute, a statutory body with 43,000 members, instead urged the government to introduce a tax break of up to HK$100,000 for rental payments to relieve the economic burden on taxpayers.
Its forecast is slightly higher than the government’s estimate of HK$46 billion in the budget in February last year.
Financial Secretary Paul Chan Mo-po, who unveils this year’s budget on February 27, said earlier this month the surplus would be “more or less” the estimated figure, which would mean a two-thirds fall from 2017-18.
The estimated surplus marks a four-year low, even though the government has enjoyed surpluses for the past 15 years.
So Kwok-kay, chairman of the institute’s taxation faculty executive committee, said the decrease was mainly because of the drop in land premium and stamp duty on property, which accounted for 20 per cent of government revenue every year.
Last year, the government received HK$164.8 billion from land sales and HK$95.2 billion from stamp duties. The institute estimated the two figures would drop to HK$120 billion and HK$94 billion respectively. Its projection for stamp duties was lower than the government’s estimate at HK$100 billion.
“From our institute’s stance, distributing a cash handout to all, no matter rich or poor, is unreasonable and not ideal,” said Curtis Ng, convenor of the body’s budget proposals subcommittee.
He said the ongoing HK$4,000 handout for those who do not own property or receive government allowances had resulted in chaos and high administrative costs.
Ng, who foresaw less pressure for a cash handout this year given the smaller surplus, urged the government to instead initiate other measures, particular for the many who rented homes.
“Many middle-class families cannot afford a property. They need to pay tax and raise children at the same time, suffering a heavy burden,” Ng said.
They proposed an annual tax reduction of up to HK$100,000 for rental payments by taxpayers on their primary residence, which would also cover those working in Hong Kong but living in the “Greater Bay Area”, a national scheme to integrate nine cities in Guangdong province with Hong Kong and Macau as an innovation powerhouse to rival Silicon Valley.
The institute also proposed a tax cut of HK$12,000 on expenses for sports training classes, aiming to encourage Hongkongers to adopt a healthier lifestyle.
Political parties have also called for a tax break for renters, with the Democratic Alliance for the Betterment and Progress of Hong Kong and New People’s Party also raising the idea with the same cap.
However, Billy Mak Sui-choi, associate professor at Baptist University’s department of finance and decision sciences, cast doubt on the effectiveness of a tax break for rental payments.
“The move could indirectly encourage landlords to charge higher rents if they know their tenants can get a tax deduction for rents and it ends up benefiting landlords, not the tenants,” Mak said.
“There is also a chance tenants will seek more luxurious flats if they know they can get tax deductions for rent. In this case, with demand increasing while supply remains unchanged, it will also push up rents for such flats.”
The government had studied the policy, but Chan last year said time was needed to upgrade the computer system and other aspects of implementation.
Chan has not disclosed the potential scale of the deduction or a timetable.