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FS unveils tax cuts, concessions in Budget
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The Financial Secretary, Mr John C Tsang, today (February 27) unveiled
a package of initiatives and concessions to help the disadvantaged,
enhance Hong Kong's competitiveness and ensure sustainable development.
"I hope that this Budget will lessen people's
burden and help them handle their various challenges," Mr Tsang
told the Legislative Council while delivering his first budget.
The Financial Secretary forecast a record budget
surplus in the Consolidated Account of $115.6 billion and a surplus
of $63.7 billion in the Operating Account for 2007-08.
He proposed a variety of measures to return the
wealth to the people, including a one-off tax reduction of 75 per
cent of salaries tax and tax under personal assessment for the 2007-08
fiscal year, up to a maximum of $25,000.
"This proposal will cost the Government $12.4
billion in 2008-09 and benefit 1.4 million taxpayers," Mr Tsang
said. "After the reduction, about a million taxpayers will
pay no more than $5,000 in tax."
Mr Tsang also proposed raising the basic allowance
and the single parent allowance from $100,000 to $108,000 as well
as increasing the married person's allowance from $200,000 to $216,000.
"Upon implementation of the proposals, all
the major allowances and tax rates will have reverted to their 2002-03
levels," Mr Tsang said.
He also proposed widening the tax bands from $35,000
to $40,000. The proposal will cost the Government $1 billion annually.
The standard rate of salaries tax and personal
assessment tax will be lowered by one percentage point from 16 per
cent to 15 per cent from the next fiscal year and profits tax will
be lowered from 17.5 per cent to 16.5 per cent. This will cost $960
million and $4.4 billon a year respectively.
Small and medium-sized businesses are also in
line for a one-off tax reduction with the Financial Secretary proposing
a concession of 75 per cent of profits tax for 2007-08, up to a
maximum of $25,000.
The proposal will benefit all 100 000 companies
liable to profits tax and cost the Government $1.73 billion.
Business registration fees will also be waived
for 2008-09.
Mr Tsang said the Research and Development sector
was a key area for promoting high value-added economic activities.
He proposed a one-off grant of $18 billion to
set up a Research Endowment Fund to replace the existing annual
funding grant to the Research Grant Council of the University Grants
Committee.
Additionally, he proposed providing 800 additional
publicly-funded places for postgraduate research programmes in phases
starting from the 2009-10 school year.
To help lower-paid people plan for their retirement,
he proposed a one-off injection of $6,000 into Mandatory Provident
Fund (MPF) accounts of those employees and self-employed persons
earning no more than $10,000 a month. This would cost $8.5 billion.
"The impact of these measures will be felt
in the medium to long term and will not have any short term economic
impact," Mr Tsang said.
"The other measures will benefit our citizens
at different times of the year. The effects of some may only appear
at the beginning of 2009," he added.
"Therefore, these measures will not generate
a lot of domestic demand in a short period of time. The stimulating
effect on inflation should be limited."
The Financial Secretary placed healthcare reform
as a priority in achieving fiscal sustainability, adding that an
ageing population posed a huge challenge for the city which he said
would be home to some 2.17 million elderly people by 2033.
He reiterated the Government's commitment to increase
the share of health care expenditure to 17 per cent of its recurrent
expenditure by 2012. And he pledged to draw $50 billion from the
fiscal reserves to assist the implementation of health care reform.
On the environment, Mr Tsang proposed a reduction
of 30, 50 or 100 per cent in the First Registration Tax of commercial
vehicles meeting Euro V emissions standards.
To encourage businesses to use cleaner production
techniques, Mr Tsang also proposed a 100 per cent profits tax deduction
for capital expenditure on environment-friendly machinery and equipment
in the first year of purchase.
Duties on wine, beer and all other alcoholic beverages
except spirits will be exempt to help promote Hong Kong as a trade
and distribution centre for quality wine in Asia.
"It is expected that by developing the various
businesses in Hong Kong relating to quality table wine, our total
business volume in trading, storage and auction of table wine may
increase by as much as $4 billion," Mr Tsang said.
In keeping with the principle of commitment to
society, the Financial Secretary earmarked $53 million to tackle
the problem of psychotropic drug abuse by young people.
Another $40 million will go toward assisting victims
of domestic abuse.
To ensure more affordable medication for the less
well off, Mr Tsang proposed setting aside $1 billion for the Samaritan
Fund to include more new medicines in the subsidy list.
CSSA and Disability Allowance recipients will
get an extra one-month payment under the budget proposals. And low-income
families will benefit from a proposed one-month rent waiver for
public housing tenants.
"As for rates, I propose to waive rates for
2008-09, subject to a ceiling of $5,000 per quarter for each rateable
tenement," Mr Tsang said.
"It is estimated that 99 per cent of domestic
properties and 85 per cent of non-domestic properties will be subject
to no rates in the year. This proposal will cost the Government
$11.2 billion."
An additional measure to help ease inflationary
pressure is a proposed electricity subsidy grant of $1,800 for each
domestic electricity account.
It is estimated that this will cover the annual
electricity bills for about 15 per cent of households, and will
cost the government about $4.3 billion.
An additional $1 billion has been earmarked for
elderly people who need to carry out maintenance or safety improvement
works for their self-occupied properties in the next five years,
up to a maximum of $40,000 per person. This proposal will benefit
30,000 elderly people.
On sharing the fruits of Hong Kong's economic
recovery with the elderly, Mr Tsang proposed providing Old Age Allowance
recipients with a one-off grant of $3,000, at a cost of $1.5 billion
to the government.
"Based on the revenue, expenditure and other
proposals set out in the Budget, I forecast a deficit of $6.3 billion
in the Operating Account and a deficit of $7.5 billion in the Consolidated
Account for 2008-09," Mr Tsang said.
He added that public expenditure, as a proportion
of GDP, would increase from 15.9 per cent in 2007-08 to 19.2 per
cent in 2008-09.
Mr Tsang predicted that a surplus would occur
again starting from 2009-10 and that the operating surplus would
build up to $67.3 billion in 2012-13.
"As the measures proposed in this Budget
are mostly one-off or time-limited, they will not have significant
implications for future public finances," Mr Tsang said.
"They will not lead to structural fiscal
deficits and are therefore in line with the principle of sustainability."
Ends/Wednesday, February 27, 2008
Issued at HKT 13:10
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