180. Hong Kong is an open economy with a relatively narrow tax base. Our revenue is susceptible to changes in the economic environment. To maintain healthy public finances, we follow the principle of keeping expenditure within the limits of revenue to ensure that the growth of expenditure is commensurate with economic growth. We also need to maintain the development and vibrancy of Hong Kong's economy and identify new areas of growth, with a view to increasing revenue.
181. Our simple and low tax regime, one of the cornerstones of our success in maintaining Hong Kong's competitiveness, is of utmost importance in bolstering our competitive edge. It is also closely related to our economy and people's livelihood. On the other hand, owing to the implementation of various policy objectives, enhancement of services and increase in investment in various areas of the community pursued by the current-term of Government, public expenditure will remain at a relatively higher level. Our anti‑epidemic efforts and the relief measures implemented in the past two years have also incurred additional expenditure. Given that government revenue should be commensurate with its expenditure, we need to implement measures to increase revenue without affecting people's livelihood, so that we can broaden our revenue sources while maintaining our policy of low tax rate in Hong Kong.
182. In last year's Budget, I proposed to raise the rate of Stamp Duty on Stock Transfers as a measure to help increase government revenue in the short run. However, with the outbreak of the fifth wave of the epidemic, businesses and individuals are generally under considerable financial pressure. Having regard to the current economic situation, I believe that this is still not the appropriate time to revise the rates of profits tax and salaries tax, which are our major sources of revenue. We anticipate that a deficit will still be recorded in 2022‑23. In the medium term, with the implementation in 2023 of the international tax reform proposals drawn up by the Organisation for Economic Co‑operation and Development (OECD), the introduction of a global minimum tax rate may help increase revenue from profits tax. I also propose to introduce a progressive rating system for domestic properties to reflect the "affordable users pay" principle. I will elaborate on these two measures in the latter part of the Budget.
183. Taking into account these new revenue streams, we expect that the Government will start to achieve fiscal balance beginning from 2023‑24.
184. In the long run, there will still be challenges in alleviating the pressure on public expenditure in the face of an ageing population. The Government will continue to explore different ways to broaden revenue sources, and will initiate in‑depth discussions in due course to forge a consensus on how to sustain healthy public finances to meet the development needs of our economy and society.
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