News & Events

Introduction:

The Financial Secretary has presented the 2012/13 Budget on 1 February 2012, which may broadly be classified into the following areas:
  (1) Stabilizing the economy;
  (2) Safeguarding people's livelihood; and
  (3) investing the future.

A number of measures in the areas such as supporting enterprises, preserving employment, increasing land supply, enhancing education resources, improving medical and health services, social welfare, introducing relief measures to help the disadvantaged, and promoting development of industries and infrastructure have been proposed to meet the above objectives.

Economic data:

For 2011 as a whole, Gross Domestic Product grew by 5 per cent in real terms. GDP growth of 1 to 3 per cent is forecasted for 2012.

The average inflation rate for 2011 was 5.3 per cent. The inflation rates for 2012 as a whole is forecasted around 3.5 per cent on average.

A revised consolidated budget surplus of $66.7 billion is forecast for 2011/12, which was originally forecasted as $8.5 billion deficit for the same period in April 2011.

Tax measures:

The tax measures included the followings:

1. To raise basic allowances from HK$108,000 to HK$120,000.
2. To raise married person allowances from HK$216,000 to HK$240,000.
3. To raise child allowances from HK$120,000 to HK$126,000 for year of birth, and from HK$60,000 to HK$63,000 each for other years respectively, subject to the 1st to 9th child respectively.
4. To increase dependent parent and grandparent allowances from HK$36,000 to HK$38,000 for those who aged 60 or above and not residing with taxpayer.
5. To increase dependent parent and grandparent allowances from HK$72,000 to HK$76,000 for those who aged 60 or above and residing with taxpayer.
6. To increase dependent parent and grandparent allowances from HK$18,000 to HK$19,000 for those who aged 55 to 59 and not residing with taxpayer.
7. To increase dependent parent and grandparent allowances from HK$36,000 to HK$38,000 for those who aged 55 to 59 and residing with taxpayer.
8. To increase dependent brother or sister allowances from HK$30,000 to HK$33,000 for whom child allowances have not been claimed.
9. To increase single parent allowances from HK$108,000 to HK$120,000.
10. To increase disable dependent allowances from HK$60,000 to HK$66,000 in addition to any allowances already granted for the disabled person.
11. To increase the deduction ceiling for elderly residential care expenses from HK$72,000 to HK$76,000.
12. To increase the maximum tax deduction for mandatory contributions to Mandatory Provident Fund schemes to $15,000.
13. To waive 75% of profits tax for 2011/12, subject to a ceiling of $12,000, to be deducted from the taxpayer's final tax payable for the year.
14. To waive 75% of salaries tax and tax under personal assessment for 2011/12, subject to a ceiling of $12,000, to be deducted from the taxpayer's final tax payable for the year.
15. To waive business registration fees for 2012/13.
16. To extend the entitlement period for the tax reduction for home loan interest to 15 years of assessment.

Other non-tax measures:

Some of the other non-tax measures are highlighted as follows:

1. Waive rates for 2012/13, subject to a ceiling of $2,500 per quarter for each rateable property.
2. Provide a $1,800 subsidy to each residential electricity account.
3. Pay two months' rent for public housing tenants.
4. Provide one additional month of Comprehensive Social Security Assistance (CSSA) payment, Old Age Allowance and Disability Allowance.
5. Abolish capital duty levied on local companies.
6. Reduce the charges for import and export declarations by 50%.
7. Launch a further issuance of "iBond" (i.e. inflation-linked retail bonds) worth not more than $10 billion.
8. Enhance the existing SME Financing Guarantee Scheme by increasing the maximum loan guarantee ratio to 80%.
9. The Hong Kong Export Credit Insurance Corporation will offer new policy terms which will include special concessions for SME policyholders.
10. Give all student loan borrowers who complete their studies in 2012 the option to start repaying their student loans one year after completion of studies.
11. Inject $10 billion into the Samaritan Fund.
12. Allocate an additional HK$100 million for short-term food assistance services to ease the low income group's financial burden from surging commodities prices, etc.

Conclusion:

The budget as a whole is welcomed by the public. The middle classes generally regarded that their voices are first heard in this budget, the best budget so far proposed by Mr. John Tsang chun-wah during his term as the Financial Secretary, as some of the proposals even exceeded their expectation, for example the tax reduction of 75% of the final salary tax payment, subject to the ceiling of HK$ 12,000, whilst the previous cap was only up to 6,000 . Similarly, initially people expect for a waiver of 2012-13 rates subject to a ceiling of $1,500 per quarter; and the budget exceeded this by proposing a waiver subject to a ceiling of $2,500 per quarter and increased various tax allowances.

In addition, more tax benefits are offered as compared to last year even those the changes in tax are not many. More direct relief such as tax refunds have been granted as expected and the waiver of business registration fee has been proposed again. These are in general welcomed by the public.

To foster the development of the retail bond market, the Government has proposed to issue another tranche of iBonds, capped at HK$10 billion. This is also welcomed by the public as many people have underestimated the return of this new kind of investment last year when it was first launched, and have not benefitted from this investment. It is suggested that a larger sum could be placed on these iBonds, and In the long run, an expansion of other kinds of bonds, such as conventional fix-rate bonds and Islamic bonds, will be beneficial for developing a mature bond market in Hong Kong.

However for those lower classes, for example the working poor, they may be disappointed by the budget. They may not earn enough to enjoy the tax benefits offered by the budget, and they are not qualified for the social welfares and housing benefits. People have commented that direct monetary payment to the working poor (as with the "Scheme $6,000“ announced last year) may provide a more meaningful way of alleviating their distress.

The budget has been commented to have carried out a lot of short-term measures to ease the short- term problems, but it lacks long- term vision in handling long- term issues. In fact in many areas the budget is quite similar to that of last year, It has been said that more can be done to generate more ideas on to tax issues so as to increase the competitiveness, for example to include super deduction for research and development expenditures, office rental expenses, and to address to other longer term problems faced by the public, for example to allow deduction of the home loan principal, and rental expenses in salary tax deduction. In addition, more can be done to address to needs of the aged and less disadvantaged groups. For example, suggestions have been made to allow for a deduction for medical expenses and essential in-patient hospital treatment for taxpayers without health insurance, and that 150% profits tax deduction can be allowed for the employers who employed these less disadvantaged groups.

Overall, this budget displayed bigger improvement and should be well received. The Financial Secretary has acted prudently and at the same time eased the immediate problems faced by large sections of Hong Kong by way of inflation and rising living costs.

Salaries Tax (2011/12 and 2012/13 (proposed))

Rates of tax	2011/12	2012/13(proposed)
First HK$40,000	2%	2%
Next HK$40,000	7%	7%
Next HK$40,000	12%	12%
On the remainder	17%	17%
Standard rate	15%	15%

Personal allowances	2011/12	2012/13 (proposed)
Basic allowance	HK$108,000	HK$120,000
Married person's allowance	HK$216,000	HK$240,000
Child allowance
1st to 9th child (each)
Year of birth	HK$120,000	HK$126,000
Other years	HK$60,000	HK$63,000
Dependent parent / grandparent allowance
Aged 60 or above
not residing with taxpayer	HK$36,000	HK$38,000
residing with taxpayer	HK$72,000	HK$76,000
Aged 55 to 59
not residing with taxpayer	HK$18,000	HK$19,000
residing with taxpayer	HK$36,000	HK$38,000
Dependent brother / sister allowance (for whom no child allowance claimed)	HK$30,000	HK$33,000
Single parent allowance	HK$108,000	HK$120,000
Disabled dependant allowance (in addition to any allowances already granted for the disabled person)	HK$60,000	HK$66,000

Deductions (maximum deduction for amount paid for):	2011/12	2012/13(proposed)
Self-education expenses	HK$60,000	HK$60,000
Home loan interest	HK$100,000	HK$100,000
Elderly residential care expenses	HK$72,000	HK$76,000
Contributions to recognised retirement schemes	HK$12,000	HK$15,000
Charitable donations	35% of assessable income	35% of assessable income

Profits Tax (2011/12 and 2012/13 (proposed))

Rates of tax
Companies	16.5%
Unincorporated businesses	15%

Plant and machinery
Initial allowance	Deduction rate
Prescribed fixed assets	100%
Environment-friendly machinery and equipment	100%
Other qualifying expenditure	60%
Annual allowance	Deduction rate
Depending on the tax written down value	10%, 20% or 30%

Industrial building allowance
	Allowance rate on qualifying expenditure
Initial allowance	20%
Annual allowance	4%

Commercial building allowance
	Allowance rate on qualifying expenditure
Annual allowance	4% until residue is reduced to Nil

Environment-friendly installations ancillary to buildings
	Allowance rate on qualifying expenditure
Annual allowance	20%

Refurbishment allowance
	Allowance rate on qualifying expenditure
Annual allowance	20%

Property Tax (2011/12 and 2012/13 (proposed))

Property tax is charged on the owner of any land or buildings in Hong Kong at the standard rate (15%) on the net assessable value of such land or buildings.

Stamp duty (2011/12 and 2012/13 (proposed))
Immovable property: conveyance on sale

Rates of duty on property consideration
Up to HK$2,000,000	HK$100	HK$100
HK$2,000,001 - $3,000,000	1.5%	1.5%
HK$3,000,001 - $4,000,000	2.25%	2.25%
HK$4,000,001 - $6,000,000	3.00%	3.00%
HK$6,000,001 - $20,000,000	3.75%	3.75%
HK$20,000,001 and above	3.75%	4.25%

Special Stamp Duty

Special Stamp Duty( SSD) on residential property transactions was proposed by the Government on 19 November 2010, which was gazetted on 3 December 2010. SSD will impose on transactions of residential properties for all values if the property is acquired by vendor on or after 20 November 2010 and resold within 2 years after acquisition.

Holding period (month)	Rate
0-6	15%
6-12	10%
12-24	5%