HONG KONG: Against a backdrop of business and community calls for an extension of tax-relief measures, Financial Secretary John Tsang has announced a series of one-off tax-relief initiatives. The most important measure, which will affect most of the working population, is the one-off reduction of the salaries tax, which will benefit all 1.4 million taxpayers.

Tsang announced the salaries tax and tax under personal assessment for 2009-10 will be reduced by 75 percent, subject to a ceiling of HK$6,000. The cut will be reflected in the taxpayer's final tax payable for 2009-10. This proposal will cost the government about HK$4.5 billion.

Tsang has also decided to waive property rates for 2010-11, subject to a ceiling of HK$1,500 per quarter for each ratable property. About 90 percent of domestic properties and 60 percent of non-domestic properties will be subject to no rates in the year. This proposal will cost the government approximately HK$8.6 billion.

Business registration fees will also be waived for one year, costing the government about HK$1.8 billion.

Tsang noted that since 2008, the government has introduced fiscal stimulus, job creation and relief measures amounting to HK$87.6 billion, which will rise to nearly HK$110 billion with this year's measures.

"I must stress that these exceptional means employed at exceptional times cannot continue for long. Otherwise, they will affect the health of our public finances and dampen the enthusiasm for economic progress," said John Tsang.

He hopes that these temporary measures will help tide over Hong Kong's citizens through their present difficulties, and help the economy regain its footing, while safeguarding people's livelihood.

Tax professionals, however, felt these measures were not enough, citing the absence of any reduction to the profits tax, given the government strong financial situation.

"We would have liked to have seen corporate profits tax reduced to 15.5 percent to further increase Hong Kong's competitiveness within the region," said Theresa Chan, president of the CPA (Certified Public Accountants) Hong Kong China Division.

She added that the organization "would have liked to have seen more support of the small and medium enterprises(SME) sector, such as a waiver tax for SMEs or introducing a concessionary profits tax rate of 12.5 percent."

The Hong Kong Institute of Certified Public Accountants complained that the fiscal measures are mainly short-term and one-off, and expressed its disappointment with the budget's lack of attention to the long-term competitiveness of Hong Kong's tax system.

The Hong Kong General Chamber of Commerce, the largest business association in the city, said the government has lost a golden opportunity to renew the city's competitiveness by lowering the profits tax.

"When our potential competitors are reducing tax rates to lure business, it makes strategic sense to raise our profile as the most competitive tax environment in the region," said Alex Fong, CEO of the Chamber.

But overall, the Chamber said it welcomed John Tsang's cautiously optimistic approach to this year's budget.

(HK Edition 02/25/2010 page3)