2003/04 Budget Unveiled

The Hong Kong Financial Secretary, Mr Antony Leung, delivered his second Budget on March 5. Designed to rein in deficit and boost Hong Kong’s economic activity with a comprehensive series of revenue-raising and expenditure-cutting measures, the Budget aims to restore fiscal balance by 2006/07 and raise investors’ confidence in Hong Kong.

“Economic growth is the key to solving the problem of fiscal deficit,” said Mr Leung.

He announced the following budget measures designed to raise revenue by HK$14 billion:
• reverting marginal tax rates and bands, as well as basic and married person’s allowances, to pre 1998-99 concession levels
• increasing standard salaries tax rate by 1% to 16% by two phases in two years
• increasing corporate profits tax to 17.5%
• revising property tax to 16% (up by 1%)
• duty on exotic horse racing and football betting
• raising of air passenger departure tax to HK$120

Mr Leung also introduced a package of specific measures to develop Hong Kong’s economy and improve people’s livelihood. Upholding the principle of ‘big market, small government’ in the HKSAR Government’s philosophy of governance, these would build Hong Kong into a regional metropolis, develop human resources and infrastructure, enhance core industries of financial services, logistics, tourism, producer and professional services and increase employment opportunities.

The package includes:
• list of infrastructure projects worth HK$2.5 billion for private sector participation on a trial basis
• HK$1 billion fund to award matching grants to universities that secure private donations for purposes other than the construction of campus buildings
• HK$200 million extra in the next 5 years to promote investment advantages of the Greater Pearl River Delta Region
• additional fund of HK$270 million to expand re-employment training programmes, attachment training and extend temporary jobs

The Financial Secretary also proposed a number of tax concessions to promote financial services, such as profits tax exemptions for offshore funds and waiver for fixed stamp duty for Hong Kong-domiciled unit trusts.

With GDP growing by 2.3% in real terms in 2002, Hong Kong’s economy is on an upward trend. Deflation persisted, with the GDP deflator dropping by 2.7%. Fiscal deficit is estimated to reach a record of HK$70 billion by March 31, 2003.

The cost-cutting measures which Mr Leung announced include:
• 10% reduction in civil service establishment; freeze in civil servant recruitment; second round of Voluntary Retirement scheme
• civil service pay cut
• reduced social security payments

Welcoming the 2003/04 Budget, the HKETO Director, Mrs Rosanna Ure said it was a balanced and business friendly budget that should be supported. “Even with a mild increase in the standard rate, the new corporate profits tax, which is still lower than other neighbouring territories, will not undermine Hong Kong’s competitiveness.” she said.

The full Budget and related documents are available on the HKSAR Government website at: www.budget.gov.hk.
 

Top