Government and Policy

HK residents to get tax breaks

By Andrea Deng (China Daily)
Updated: 2011-03-03 08:18

HONG KONG - Financial Secretary John Tsang Chun-wah has opened up his bag of goodies, announcing cash giveaways and income tax exemptions, while simultaneously withdrawing some other programs from his much maligned Feb 23 Budget. The financial secretary's latest initiatives on Wednesday are expected to benefit 6 million people.

The previously announced HK$6,000 ($770) injection on behalf of each subscriber to the Mandatory Provident Fund (MPF) is gone, to make way for money distribution and partial tax exemptions.

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Tsang had pleaded that the government was aiming at incentives to encourage people to save money, rather than to receive instant handouts.

Hong Kong permanent residents aged 18 and over will get HK$6,000 each. That will cost the government HK$4 billion. He also announced a remission of up to 75 percent of the income tax, with an upper limit of HK$6,000. The entire list of tax breaks will carry a price tag of some HK$36 billion.

"I believe that the revised measures will now benefit most of the citizens, covering civil servants, housewives and retired people," said Tsang at the news conference.

The 2011 budget speech left many residents feeling frustrated and angry over the absence of "sweeteners" to help them deal with soaring inflation. An immediate survey conducted by the Hong Kong Institute of Asia-Pacific Studies showed 41.3 percent of respondents were dissatisfied with the budget. Tsang's approval rating reached a record low of 47.2 points.

Tsang had rejected the public condemnation over what many called fiscal hoarding, in the face of a huge budget surplus. He countered that direct distribution of money as well as reduction of salary taxes would worsen inflation.

"As a matter of fact, many of the measures will not do any good for inflation. But some of our measures have not gained recognition from the public," said Tsang.

Some have changed their views since the announcement.

A 63-year-old woman surnamed Lee, who makes a living by collecting paper and cardboard, said she was thrilled about the change and would spend most of it on food.

The change has come in for both praise and criticism from lawmakers. Tam Yiu-chung, chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong, applauded the move, saying that the revision has "responded to the citizens' appeal".

"Whether money should be distributed largely depends on how much of a fiscal reserve we have. The government should be careful not sending out a message that there will be direct distribution of money every year," said Professor Chong Tai-leung from the Department of Economics of the Chinese University of Hong Kong.