FS allocates resources for introducing relief measures and investing for the future in 2017-18 Budget
The Financial Secretary, Mr Paul Chan, has today (February 22) in the 2017-18 Budget announced $35.1 billion in short-term relief measures and tax breaks, and $61 billion in longer-term investments for community benefit.
"My endeavour is to make use of the wealth we have accumulated together through hard work to take care of the needy in society, ease the heavy burden of middle-class families, and make appropriate investments essential for building a better Hong Kong," Mr Chan said in his maiden Budget Speech.
"I will introduce a series of measures that will, on the one hand, share the fruits of our economic development with members of the public, stimulate domestic demand, stabilise the economy and support the employment market and, on the other hand, invest for the future by optimising the use of government resources."
This set of tax and short-term relief measures, together with other spending initiatives in the Budget, will have a fiscal stimulus effect of boosting gross domestic product (GDP) for 2017 by 1.1 per cent. One-off relief measures include:
* Reducing salaries tax and tax under personal assessment for 2016-17 by 75 per cent, subject to a ceiling of $20,000. This proposal will benefit 1.84 million taxpayers and reduce government revenue by $16.4 billion;
* Reducing profits tax for 2016-17 by 75 per cent, subject to a ceiling of $20,000. This proposal will benefit 132 000 taxpayers and reduce government revenue by $1.9 billion;
* Waiving rates for four quarters of 2017-18, subject to a ceiling of $1,000 per quarter for each rateable property. This proposal will benefit 3.21 million properties and reduce government revenue by $10.9 billion; and
* Providing extra allowances to social security recipients and other allowance and subsidy recipients. This will involve an additional expenditure of about $3.5 billion. Similar arrangements will apply to the Low-income Working Family Allowance and the Work Incentive Transport Subsidy, involving an additional expenditure of about $100 million.
In addition to the above one-off measures, the Financial Secretary also proposes, after taking into account the Government’s fiscal position in the short to medium term, the following five recurrent tax measures starting from 2017-18 so as to relieve the burden on taxpayers:
(a) Widening the marginal bands for salaries tax to $45,000. This measure will reduce the tax burden of 1.3 million taxpayers and reduce tax revenue by $1.5 billion a year;
(b) Raising the disabled dependant allowance to $75,000. This measure will benefit 35 000 taxpayers and reduce tax revenue by $50 million a year;
(c) Raising the dependent brother/sister allowance to $37,500. This measure will benefit 23 800 taxpayers and reduce tax revenue by $13 million a year;
(d) Extending the entitlement period for the tax reduction for home loan interest to 20 years of assessment. This proposal will reduce tax revenue by $430 million a year; and
(e) Raising the deduction ceiling for self-education expenses to $100,000. This measure will benefit 3 500 taxpayers and reduce tax revenue by $8 million a year.
Mr Chan also pointed out that the ageing of buildings is a thorny issue posing health and safety risks for the community. While owners are responsible for timely maintenance of their buildings, many of them find the relevant procedures daunting. To help property owners secure the necessary technical support, the Government will earmark $300 million to allow owners to participate in the "Smart Tender" Building Rehabilitation Facilitating Services Scheme run by the Urban Renewal Authority at a concessionary rate. It is estimated that owners of about 4 500 buildings will benefit from this initiative in the next five years.
"The Government has always attached great importance to the development of SMEs and rendered them key assistance in tapping new markets and enhancing overall competitiveness. As the external economic environment is still fraught with uncertainties, we will continue to support local SMEs," Mr Chan added. The Government proposes to strengthen the underwriting capacity of the Hong Kong Export Credit Insurance Corporation, and to continue to provide support to SMEs through the Technology Voucher Programme, the Dedicated Fund on Branding, Upgrading and Domestic Sales and the SME Financing Guarantee Scheme.
Given the higher-than-expected surplus for this financial year, the Financial Secretary will take a forward-looking approach to put $61 billion of the surplus to good use, by implementing the following:
* Earmarking $30 billion to strengthen elderly services and rehabilitation services for persons with disabilities;
* Earmarking $20 billion for 26 sports and recreation facilities projects in the coming five years in different districts;
* Reserving $10 billion to support innovation and technology development in Hong Kong; and
* Deploying $1 billion for youth development, including $700 million for the Education Bureau to strengthen efforts in promoting vocational and professional education and training, facilitate the training and professional development of principals and teachers, and enhance support for local post-secondary students, including those pursuing self-financing post-secondary programmes. In addition, $300 million will be provided in 2017-18 for the Home Affairs Bureau to expand the Multi-faceted Excellence Scholarship and the International Youth Exchange Programme to provide more chances for young people to enrich their exposure and broaden their horizons.
On economic performance, Mr Chan said there was a modest growth of 1.9 per cent in 2016 as a whole, and predicted GDP growth of 2 to 3 per cent in 2017.
The unemployment rate averaged 3.4 per cent in 2016, sustaining a state of full employment in general. Inflation pressure was moderate. The headline inflation for 2016 was 2.4 per cent, while the underlying inflation was 2.3 per cent. For 2017, headline inflation of 1.8 per cent and underlying inflation of 2 per cent is predicted.
On government finances, the revised estimate on government revenue in 2016-17 is $559.5 billion, 12 per cent or $61.3 billion higher than the original estimate. This is due mainly to the increase in revenue from land sales and stamp duty.
The forecast revised estimate of government expenditure in 2016-17 is $466.7 billion, 4.1 per cent or $20.2 billion lower than the original estimate - mainly because $10 billion set aside for the Hospital Authority Public-Private Partnership Fund was advanced and allocated in 2015-16.
Mr Chan forecast a surplus of $92.8 billion for 2016-17. Fiscal reserves are expected to reach $935.7 billion by March 31, 2017.
Mr Chan said total government revenue in 2017-18 is estimated at $507.7 billion. The overall expenditure of the Government for 2017-18 is estimated to be $491.4 billion, representing an increase of 5.3 per cent compared with the revised estimate for 2016-17. Operating expenditure for 2017-18 is estimated to be $384.2 billion, representing a year-on-year increase of 8.5 per cent or $30.1 billion. Recurrent expenditure, which accounts for over 90 per cent of operating expenditure, will reach $371 billion, reflecting a year-on-year increase of 7.4 per cent or $25.6 billion. In 2017-18, the estimated recurrent expenditure on education, social welfare and healthcare accounts for about 60 per cent of government recurrent expenditure, exceeding $210 billion in total. Recurrent expenditure in these three areas recorded a cumulative increase reaching 43 per cent in these five years.
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