HONG KONG: The government should provide immediate tax concessions to ease the current financial impasse and help taxpayers to ride out the financial storm, the leading accounting firm Deloitte advised yesterday.

Specifically, the company proposed a waiver of 75 percent of salary tax, profits tax and property tax, with a cap of HK$20,000 for the 2008-09 financial year. Deloitte also recommended an exemption of government service fees, with a HK$5,000 ceiling applied quarterly.

For the longer term, Deloitte also suggested increasing tax allowances by 5 percent to remain in step with inflation. The report recommended raising the marginal tax bands from HK$40,000 to HK$50,000. At the same time it said the tax rate on profits should be lowered from the present 16.5 percent to 15 percent over two years, as a way of enhancing Hong Kong's competitive edge.

The recommendations appear in Deloitte's latest budget forecast, issued prior to the 2009-10 budget speech by Financial Secretary John Tsang. He is scheduled to table next year's budget February 25th.

Referring to the HK$30.9 billion surplus recorded in the first nine months, Deloitte's tax partner Yvonne Law said the estimates penciled in a reduced surplus of HK$10 billion by year's end. She explained that the government still faces several major expenditures during the final two months of the current fiscal year.

As financial turmoil continues to rock markets around the world, Law reckoned the government could do much to resolve current difficulties by providing instant tax relief. "The result for 2008-09 is better than expected, since some people had forecast a deficit as high as HK$50 billion," she told a press conference. "Now with a HK$10 billion surplus, people expect the government to do something and our proposed expenditure is within what the government can afford."

(HK Edition 02/11/2009 page1)