HK targets revenue boost through tax reforms, fiscal measures

Proposed measures include implementing a two-tiered tax regime for salaries and personal assessment.

The government has introduced measures aimed at increasing revenue for Hong Kong in the 2024-25 Budget. 

Financial Secretary Paul Chan said despite concerted efforts to curtail spending, the total expenditure for 2023-24 surged to $727.9b, a 36.9% increase compared to 2018-2019 figures. Operating expenditure also saw a spike by 40.2% whilst operating revenue lagged with a modest 13.1% increase.

Proposed measures include implementing a two-tiered tax regime for salaries and personal assessment, projected to generate an additional $910m annually.

Legislative amendments also seek to introduce a progressive property rating system, bringing in $840m more each year. 

Moreover, business registration fees will increase by $200 to $2,200 annually, resulting in an extra $295m annually. 

The government will put the Hotel Accommodation Tax back at 3% from 1 January 2025, adding $1.1b yearly to government coffers. 

In alignment with international tax reform efforts, Hong Kong plans to implement a global minimum tax rate of 15% on large multinational enterprises, projected to generate tax revenue of about $15b annually from 2027-28 onwards.

For infrastructure needs, the government plans to issue bonds totalling $95b to $135b annually over the next five years, primarily for the Northern Metropolis development and other crucial projects.

The government also intends to issue bonds totalling $95b to $135b annually over the next five years, with funds directed towards advancing the development of the Northern Metropolis and various infrastructure projects.

Chan also outlined a fiscal consolidation plan for the city.

Amongst the measures include zero growth in the civil service establishment and implementing a productivity enhancement initiative to slash recurrent government expenditure by 1% over two consecutive years. 

All government departments are also mandated to cut recurrent expenditure by an additional 1% in 2026-27.

The financial secretary noted that despite the government's efforts to manage total expenditure growth, there has been a notable increase in the resources allocated to public services.

“The government will continue to adhere strictly to fiscal discipline and keep the government debt at a prudent level,” he said.
 
Chan projected a debt-to-gross domestic product ratio ranging from 9% to 13% between 2024-25 and 2028-29, significantly lower than many advanced economies.