Hong Kong budget sweeteners help lift some of family's cash burden

With two children and a mortgage to pay off, Matchy Choi Shun-yin and his wife Teresa are one of the many middle-class families in the city that should benefit from the range of sweeteners in the budget.

Child allowances and rebates are among some HK$34 billion in one-off relief measures announced by Financial Secretary John Tsang Chun-wah yesterday, with the aim of "alleviating the financial burden on the public".

At least 1.8 million taxpayers will pay 75 per cent less on salaries tax - this time capped at a higher HK$20,000 - while profits tax is to be reduced by the same amount, benefiting 130,000 taxpayers.

Other one-off relief measures promised by Tsang include an increase in the basic and additional child allowances, from HK$70,000 to HK$100,000 in 2015 to 2016. The owners of 3.1 million properties will also see rates waived for the first two quarters of the coming financial year - subject to a HK$2,500 ceiling per quarter for each property.

"The middle-class taxpayers paying progressive rates will feel the impact of the increased child allowance the most," said Barbara Forrest, tax partner at KPMG China.

Florence Chan Yuen-fan of the Institute of Certified Public Accountants agreed, saying the measures were "surprisingly generous", with middle-class earners having much to gain. "The income tax rate is already very low to begin with," she said.

With two dependents each, Choi, a drama educator, and his wife, a speech therapist at a special needs school, make about HK$70,000 a month and pay about HK$14,000 in mortgage payments.

The couple pay the 17 per cent rate on income tax and have calculated they will reap tax savings of a little over HK$10,000 under the new arrangements - to be reflected in the final tax payable for 2014-15.

"Do we welcome it? Of course we do," said Choi, who feels the voices of the middle class have largely fallen on deaf ears in recent years. "But we are not exactly thrilled. An extra HK$10,000 is not a substantial amount to spend nowadays."

Choi agrees tax rebates are better than cash handouts, but he says the government should work more on improving policy rather than thinking about how to give out sweeteners to placate citizens, many of whom are frustrated with the way things are.

"We were more disappointed about the policy address to be honest," said Choi. "Many of those who participated in the Occupy movement last year were from the middle classes." Both said they see many areas where public money can be put to better use in the education sector.

In his speech, Tsang said he was aware that citizens were expecting relief measures from the government in view of challenging economic factors and the government's "relatively sound fiscal position".

Tsang said he understood that many parents wanted more specific tax exemptions to ease the financial burden of taking care of their children, but said "we need also to avoid complicating the tax regime".