Hong Kong budget 2020-2021
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Commuters in face masks is seen going to work at the Hong Kong Station amid the COVID-19 pandemic in the morning, Central. 21APR20 SCMP / Winson Wong

Coronavirus: Hong Kong budget debate begins with lawmaker calls for more taxes, fewer construction projects

  • Pan-democrat takes aim at controversial Lantau reclamation project, while pro-establishment politician sees value in value-added tax
  • City cannot ‘wait for a natural recovery’, lawmaker Starry Lee says as debate over new budget kicks off
Hong Kong needs to broaden its tax base and scrap costly infrastructure projects as the city faces a ballooning deficit due to the economy’s battering by the Covid-19 pandemic, lawmakers said on Wednesday.

The remarks came as the Legislative Council kicked off a marathon debate over the government’s budget, tabled as the Appropriation Bill.

Financial Secretary Paul Chan Mo-po’s budget, unveiled in a February 26 speech, offered cash handouts, tax breaks and a raft of subsidies in a HK$120 billion coronavirus relief package aimed at easing the financial burden on citizens and injecting new life into the economy.
But with the crisis slow to improve, Chief Executive Carrie Lam Cheng Yuet-ngor unveiled a follow-up relief package earlier this month – the administration’s largest to date – offering HK$137.5 billion to struggling businesses.
Financial Secretary Paul Chan warned Hong Kong faced a deficit of HK$276.6 billion – or higher – when he delivered his budget to Legco in February. Photo: Nora Tam

Chan had warned the pandemic and subsequent relief packages could see the deficit expand beyond his predicted HK$276.6 billion (US$35.7 billion), while the city’s economy could simultaneously contract more than expected.

Pan-democrat accountancy sector legislator Kenneth Leung said given those realities, the government should be axing costly construction projects.

Top of Leung’s list was Lantau Tomorrow Vision, an ambitious – and controversial – proposal to build Hong Kong’s next housing and business hub on artificial islands at an estimated cost of at least HK$624 billion.

“I urge the government to follow the Basic Law and make sure public spending and revenue are of similar levels,” Leung said, referencing guidelines warning against deficits.

Hong Kong budget to hit record deficit of HK$139 billion with relief measures

Pro-establishment lawmaker Starry Lee Wai-king, chairwoman of the Democratic Alliance for the Betterment of Hong Kong, said the government must not lose focus on long-lasting issues, including unaffordable property prices. But she also urged a proactive response to boosting the economy in the pandemic’s aftermath.

“We cannot solely rely on the free market and wait for a natural recovery,” Lee said.

She also praised the administration for rolling out relief measures after the economy was staggered by the dual blows of last year’s social unrest and the current Covid-19 crisis.

Another pro-establishment lawmaker, Michael Tien Puk-sun, said the staggering deficit showed the government needed to introduce new taxes aimed at high-profit businesses, as well as a value-added tax and taxes aimed at luxury goods.

“There should be a large variety of taxes, but with low tax rates, so the tax revenue will remain steady,” he said.

Police to ramp up manpower by more than 7 per cent with 2,500 new posts

The budget is expected to be approved with support from the pro-establishment camp, which dominates the legislature.

Pan-democrats, however, including those from the Democratic Party and the Civic Party, have vowed to vote against it.

Civic Party leader Alvin Yeung Ngok-kiu said his party would vote no to reflect people’s discontent with the administration’s poor governance.

“When [the government was] criticised for [allowing Beijing interference], did any official dare to refute?” Yeung said, referring to a recent row over the role of the mainland’s liaison office and to what extent it has oversight of Hong Kong affairs.

Yeung also took issue with the government’s plan to increase the headcount of the police force to more than 38,000, taking their annual budget to HK$25.8 billion.

“When there is no means to restrict police powers, why do we still have to give money to the police to expand its armoury and recruit new officers?” he asked.

The debate will continue on Thursday.