Building an ideal city for the future

• The outstanding commitment of all the commenced projects has reached $340 billion, which is yet to include future investment in the new runway, new development areas, reclamations, and other projects under planning

“To stay highly efficient and become even more competitive,
we must put in place a comprehensive strategy,
not only for improving the efficiency in the flow of people, goods,
capital and information, but also for enhancing the quality of
our living environment and our position as an international hub. ”

Development of Industries

Innovation and Technology Industry

• Set up an Enterprise Support Programme under the Innovation and Technology Fund (ITF) to support R&D activities in private companies, subject to a ceiling of $10 million
• Extend the scope of ITF to fund development work and system integration, industrial design, compliance testing and clinical trials, etc
• Grant $24 million each year to six designated universities to provide seed money for R&D projects and encourage their students and teachers to start up businesses
• Develop an interactive portal to pool all stakeholders in the startup community to promote inventions and innovations as well as attract funding

Financial Services

• Waive stamp duty on the trading of all ETFs to lower transaction costs
• Issue iBond worth up to $10 billion
• Review requirements under Inland Revenue Ordinance for interest deduction in the taxation of treasury activities to draw more of these activities to Hong Kong

Tourism

• Release six sites within the “hotel belt” adjacent to the Kai Tak Cruise Terminal to develop a distinctive hotel cluster
• Reserve $45 million for providing services and concessions for conventions and exhibitions in the coming three years
• Reserve $50 million for strengthening popular tourist events in the next two years by, for example, introducing 3D projection mapping technology to help showcase the magnificent night view of the Victoria Harbour

Trade and Logistics Industry

• Complete the midfield development of Hong Kong International Airport in 2015
  

Business and Professional Services

• Work with Guangdong Province for early achievement of liberalisation of trade in services between Hong Kong and Guangdong this year

Small and Medium Enterprises

• Extend application period for special concessionary measures under SME Financing Guarantee Scheme for one year
• Support retailers on a matching fund basis for the use of IT applications and other technologies
• Promote cloud computing applications among SMEs and
  provide them with relevant training
• Reduce profits tax for 2013-14 by 75%, subject to a ceiling of $10,000

“They have become Hong Kong’s pillar industries,
not on account of any mandatory selection by the government,
but because they have been able to capitalise on their
own strengths as well as Hong Kong’s edge.
Decades of effort by these industries amid natural selection in
the international market have contributed to Hong Kong’s position
as a commercial hub, a financial centre,
and an international tourist destination.”

Highlights of the Report of the Working Group on
Long-Term Fiscal Planning

Long-term Projection

• The Government’s overall fiscal position in the short to medium term remains healthy. In the long run, the Government must develop the economy, and align the growth rates of government revenue and expenditure
• The rate of economic growth is expected to slow down. In the next 20 to 30 years, nominal GDP will grow at an average rate of 4.4% per annum, while real GDP will grow at 2.8% per annum
• An annual trend growth rate of 4.5% for government revenue is projected for the next 20 to 30 years
• The Working Group has made the following projections based on different expenditure growth scenarios:
  1. With no service enhancement on education, social welfare and healthcare, government expenditure would grow by 5.3% per annum - a structural deficit would surface in 15 years
  2. If recurrent expenditure on the above three areas were to further increase by 1% to 2% per annum for service enhancement, government expenditure would grow by 6% to 6.7% per annum - a structural deficit would surface in 8 to 10 years
  3. If services were to be enhanced following the historical trends at about 3% per annum for the above three areas, government expenditure would grow by 7.5% per annum - a structural deficit would surface in seven years

Recommendations

Containing Expenditure Growth

• Public expenditure be pitched at 20% of GDP, which is commensurate with public revenue and ensures that public expenditure will not consume excessive social resources
• All departments need to consider how to consolidate their services and assistance programmes, and phase out outdated and overlapping programmes

Preserving Revenue Base

• The Government is obliged to preserve, stabilise and broaden the revenue base
• Reinforce the “cost recovery”, “user pays” and “pollutor pays” principles
• The Inland Revenue Department needs to step up tax enforcement and to combat tax evasion and avoidance, thereby recovering tax payable
• Enchance the tax regime to ensure it meets the long-term needs of Hong Kong

Saving for the Future

• Set up a savings scheme to prepare for the future having regard to the experience of other economies

“An ageing population will pose sustained challenges to public finances.
The conclusions and recommendations of
the Working Group have provided a scientific and objective basis for
the community to better understand the issue.
We should be proactive, rational and pragmatic and
take early actions to address the challenges ahead when
our public finances are still healthy.”