Rebounding economy brings Christmas cheer to Hong Kong

Updated: 2009-12-22 07:35

By Joseph Li(HK Edition)

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HONG KONG: Hong Kong's economic and financial conditions are improving quickly after the shocks of the global financial crisis, the accounting firm Pricewaterhosue Coopers said yesterday.

In this connection, the firm predicted a decent budget surplus for the financial year ending March 31, 2010, that will be measured in the billions of dollars.

That would stand in marked contrast to the earlier expectation of a nearly HK$40 billion deficit as penciled in this year's budget.

The company also predicted the government would have plenty of latitude to make use of the money to improve the livelihood of Hong Kong's population and to enhance Hong Kong's competitiveness in the long run.

Speaking at a pre-budget briefing session, Gus Ellis, the firm's tax partner, said the latest economic indicators such as economic growth, unemployment and inflation are improving.

On government revenue, he predicted a huge increase in stamp duties as a result of the stock and property market booms. He also predicted pretty good revenue from land premium and investment incomes.

"We have quite good news for Christmas," he said. "The picture is not as grim as what the financial secretary painted last year."

His fellow tax partner Tim Lui added that the government has in the past always underestimated the revenue section.

"We expect the government will reap nearly HK$40 billion in stamp duties from property transactions and about HK$25 billion from land premiums and land auctions, not only eliminating the penciled deficit but also achieving a surplus," he analyzed.

The level of fiscal reserves is estimated to exceed HK$500 billion.

Barring unforeseen economic changes, economic conditions will be quite good in 2010 and a surplus is very likely.

"The government will have more leeway in using the surplus to return wealth to the people," Lui suggested. He added that once-and-for-all concessions measures will be feasible, knowing that recurrent measures will have an impact on the government's long-term finances.

He noted that the 2009 policy address proposed six key industries on top of the four existing economic pillars.

The government can perhaps allocate financial resources and provide tax concessions to help development of the six industries, he said.

(HK Edition 12/22/2009 page1)