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Easing Pressure and Stimulating Economic
Growth
126. During the Budget consultation, political parties and members of the public made many suggestions on relief and concessionary measures. They have diverse views on whether we should continue the one-off relief measures implemented in recent years. I understand that members of the public, especially the grass roots, hope that the Government will help ease the heavy burden and pressure on them. Some, however, opined that one-off hand-outs are undesirable as resources should be expended to implement appropriate policies to provide recurrent support to the needy. I must stress that the allocation of resources by the Government is based on the principle of "policy leads and financial resources follow". For one-off measures or otherwise, the use of all government expenditure should be strictly subject to the same principle of fiscal prudence. We must commit our resources only when justified and needed. Every dollar should be spent on appropriate measures, and not squandered.
127. One-off measures, from a micro perspective, can help ease the community's burden, and are counter-cyclical from a macro perspective for coping with short-term economic fluctuations, maintaining spending power and supporting the employment market. The measures I proposed in last year's Budget had a stimulus effect on GDP that helped maintain local economic growth and a low unemployment rate. In the year ahead, having regard to the uncertain external outlook and the risk of rising inflation caused by quantitative easing measures in various countries, I consider that we still have to introduce some stimulus measures.
128. I have also been listening to the voices of people from the middle class. They have expressed to me the heavy burden they have to bear in coping with expenses on rent, medical care, support for their parents, children's education, etc. They hope that I would consider specific tax measures for them. I agree that middle-class families should be given some support. However, as one may appreciate, it is impracticable for the Government to respond to each and every demand. The Government must take into account its overall financial commitments and the fairness of resource allocation. I am inclined to adopt a simple and direct approach through one-off tax reduction and increase in tax allowance as a response to the various aspirations of the middle class.
129. Many business chambers and SMEs have also told me that increase in rentals and other costs have posed difficulties to the operation of enterprises. They proposed that the Government should introduce relief measures, including lowering the profits tax rate for SMEs with profits below a particular level. I have given due consideration to their proposals. Profits tax revenue is now sourced from a handful of enterprises while nearly 90 per cent of companies do not have to pay tax. There will be practical difficulty in applying different tax rates to those tax-paying enterprises, and this will complicate our simple tax regime. The low profit-making enterprises will not benefit much as a result. Having regard to the implications of the tax proposals on individual enterprises, our tax base and tax revenue, I am inclined to adopt a simple and direct approach through one-off tax reduction to meet the aspirations of our business sector.
130. I propose the following one-off measures:
(a) |
waiving rates for 2013-14 Note2, subject to a ceiling of $1,500 per quarter for each rateable property. It is estimated that around 75 per cent of properties will be subject to no rates in the year. This proposal will cost the Government $11.6 billion; |
| (b) |
reducing salaries tax and tax under personal assessment for 2012-13 by 75 per cent, subject to a ceiling of $10,000. The reduction, benefiting 1.53 million taxpayers in the territory, will be reflected in the taxpayers' final tax payable for 2012-13. This measure will cost the Government $8.4 billion; |
| (c) |
granting each residential electricity account a subsidy of $1,800. This will cost the Government $4.5 billion; |
| (d) |
providing an extra allowance to Comprehensive Social Security Assistance (CSSA) recipients, equal to one month of the standard rate CSSA payments; and an extra allowance to Old Age Allowance, Old Age Living Allowance and Disability Allowance recipients, equal to one month of the allowances. This will involve an additional expenditure of $2.7 billion; |
| (e) |
paying two months' rent for public housing tenants Note3. The Government will pay two months' base rent for tenants who are required to pay extra rent to the Hong Kong Housing Authority. For non-elderly tenants of the Hong Kong Housing Society's Group B estates, the Government will pay two-thirds of their rent for two months. This measure will involve an expenditure of $2.2 billion; |
| (f) |
I extended and improved short-term food assistance services through the additional funding of $100 million made in my last Budget. The Labour and Welfare Bureau will seek this Council's approval for the provision in the next financial year. When necessary, the Government will allocate another $100 million for the services; and |
| (g) |
giving all student loan borrowers who complete their studies in 2013 the option to start repaying their student loans one year after completion of studies. This will alleviate the financial burden of fresh graduates. |
131. To alleviate people's burden in raising their children and to encourage self-education and lifelong learning, I propose:
| (a) |
increasing the basic and additional child allowances from the current $63,000 to $70,000 for each child. After the adjustment, the allowance for babies born in 2013-14 will be $140,000 for the year. This measure will benefit 300 000 taxpayers, estimated to cost the Government $410 million a year; and |
| (b) |
raising the deduction ceiling for self-education expenses from $60,000 to $80,000. This measure will benefit 6 000 taxpayers, estimated to cost the Government $10 million a year. |
132. In the face of the unstable external economic environment and increasing operating costs, apart from the six support measures for SMEs that were mentioned earlier, I propose the following two one-off measures to help our enterprises:
| (a) |
waiving the business registration fees for 2013-14 to benefit 1.2 million business operators. This proposal will cost the Government $2.1 billion; and |
| (b) |
reducing profits tax for 2012-13 by 75 per cent, subject to a ceiling of $10,000. The reduction will be reflected in the taxpayers' final tax payable for 2012-13. This proposal will benefit 119 000 taxpayers who are liable to profits tax, costing the Government $1 billion. |
The above 11 relief measures, involving $33 billion, should be able to help ease the pressure on our middle class, grass roots and SMEs.
Note 2 |
Comprehensive Social Security
Assistance recipients who do not have to bear rates
and public housing rents will not obtain any pecuniary advantage from the two
measures of waiving rates and paying rents for public housing tenants. |
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