Hong Kong Budget 2008/2009 Highlights

Economic Indicators

• 6.3% increase in real GDP in 2007/2008. A 4% to 5% increase in GDP in real terms is forecast for 2008/2009. Medium term annual growth forecast over the period 2009 to 2012 is estimated to be 4.5% in real terms.
• Inflation for 2007/2008 and 2008/2009 of 2% and 4.5%, respectively.
• A revised consolidated budget surplus of HKD115.6 billion is forecast for 2007/2008, as compared with the original HKD25.4 billion surpluses forecasted this time last year for the same period. The HKD115.6 billion is made up of an HKD63.7 billion surplus on the operating account and an HKD51.9 billion surplus on the capital account.
• A consolidated budget deficit of HKD7.5 billion is forecast for 2008/2009. By 2012/2013, a consolidated surplus of HKD75 billion is forecast, comprising surplus of HKD67.3 billion and HKD7.7 billion on the operating and capital accounts, respectively. At the end of 2012/2013, the Government is projecting it will have fiscal reserves of around HKD723 billion, approximately equivalent to 25 months of total Government expenditure.
• Operating expenditure for 2007/2008 is forecast to be HKD206.4 billion. Going forward, while total public expenditure will be kept well below 20% of GDP, operating expenditure is projected to increase to HKD286.5 billion in 2012/2013.

Profits Tax

• Reduction in profits tax rate by 1% to 16.5% and 15% for companies and unincorporated business respectively.
• Accelerated tax depreciation for environment friendly equipment and building installation.
• Increase the ceiling of tax deductible charitable donations from 25% to 35% (equally applied to salaries tax and tax under personal assessment).

Salaries Tax

• No change in marginal tax rates. Marginal tax bands are widening by HKD5, 000 to HKD40, 000.
• Reduction in standard tax rate by 1% to 15%.
• Restoring basic allowance, married person¡¦s allowance and single parent allowance back to the 2002/2003 level of HKD108, 000, HKD216, 000 and HKD108, 000 respectively.

Government Duties and Charges

• Exempt alcohol duty on wine, beer and all other alcoholic beverages except spirits.
• Waiver of hotel accommodation tax.

One-off Measures

• Waiver of 75% of profits tax, property tax, salaries tax and tax under personal assessment for 2007/2008, subject to a ceiling of HKD25, 000, deducted from the taxpayer¡¦s final tax payable for the year.
• Waiver of rates for 2008/2009, subject to a ceiling of HKD5, 000 per quarter for each rateable tenement.
• One additional month¡¦s standard rate CSSA payments for CSSA recipients, and one additional month of allowance for recipients of Disability Allowance.
• One-off payment of HKD3, 000 to each recipient of Old Age Allowance.
• One-off injection of HKD6, 000 into the MPF accounts of those people earning not more than HKD10, 000 per month.
• Waiver of business registration fee for 2008/2009.
• Providing a subsidy of HKD1, 800 to each domestic electricity account.

Others

• Various expenditure measures to promote the economy and employment, and measures to improve livelihood and support disadvantaged groups.
• Continued commitment to invest in infrastructure projects of HKD21.8 billion for 2008/2009, excluding the upfront endowment of HKD21.6 billion to the West Kowloon Cultural District Authority.
• Earmarking HKD50 billion from the fiscal reserves to promote healthcare reform.
• A reduction in the First Registration Tax for environment-friendly commercial vehicles.