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Budget Speech

Estimates for 2023-24

188. Despite enduring the epidemic for over three years, our society remains fairly stable and our public finances are robust.  However, we have seen two years of heavy fiscal deficits, while the external environment is still rife with challenges.  We will continue to adhere to the principles of exercising fiscal prudence, keeping expenditure within the limits of revenue, committing resources as and when justified and needed, strictly containing the growth of government expenditure and exploring various ways to increase revenue.  In addition, we will consider utilising appropriate financial instruments (such as issuance of bonds) to better manage cash flow, and launch several major infrastructure and works projects as scheduled to benefit the public as early as possible.


189. The major policy initiatives announced in the 2022 Policy Address involve operating expenditure of about $27.8 billion and capital expenditure of $29.1 billion.  I will ensure that adequate resources are provided to fully support the launch of these initiatives.

190. In 2023‑24, the recurrent expenditure will slightly increase by 3.3 per cent to $560.2 billion.  Of this, substantial resources have still been allocated to livelihood-related policy areas including healthcare, social welfare and education, involving a total amount of $329.4 billion, representing 59 per cent of the recurrent expenditure.  Non‑recurrent expenditure will substantially decrease by 53 per cent to $69.3 billion.

191. Total government expenditure for 2023‑24 will decrease by 6 per cent to $761.0 billion, with its ratio to nominal GDP projected to drop to 25 per cent.

192. We will continue to strictly control the growth of the civil service establishment.  The Government's target of zero growth in the civil service establishment will remain unchanged in 2023‑24.  It is expected that as at end‑March 2024, the civil service establishment will remain at about 197 000 posts.


193. In the face of pressure on public finances, we have to reduce expenditure and, more importantly, increase government revenue.  The key direction for increasing government revenue is "growing the pie" with a view to driving up revenue through economic growth.  Enterprises and individuals faced huge pressure during the economic downturn in the past few years.  While we are steadily returning to normalcy, it will take some time for us to recuperate and consolidate our foundation.  Therefore, we should strive to minimise the scope of impact brought by any upward adjustment of taxes as far as possible.

194. Profits tax and salaries tax are our major sources of revenue.  In previous Budgets, it was mentioned that revisions to these tax rates would be put on hold having regard to the epidemic and prevailing economic situation.  Our community has now entered the post‑pandemic stage, with travelling between Hong Kong and the Mainland and the rest of the world resuming in recent months and the atmosphere in society turning optimistic.  However, given that external economic conditions are still slackened, volatile and ever-changing, the momentum of Hong Kong's economic recovery still requires consolidation.

195. Besides, when reviewing whether adjustments or changes should be made to various government taxes, we have to consider whether such adjustments or changes are in line with other government policy objectives and social values, as well as take into account our competition with neighbouring regions.  Hence, I propose that profits tax and salaries tax rates should remain unchanged this year.  This will help Hong Kong maintain our long-standing advantages with regard to our tax regime, and will complement with the Government's overall policy direction of attracting enterprises and talents.  As regards other proposals on the imposition of new taxes, we must first clearly consider the policy objectives of imposing such new taxes and allow thorough discussions in society before weighing the pros and cons of the proposals and making any decision on them.

196. Nevertheless, in the face of fiscal pressure, we must seek ways to increase government revenue in the short term.  I propose to impose an annual special football betting duty of $2.4 billion on the Hong Kong Jockey Club (HKJC) under the Betting Duty Ordinance for five years starting from 2023‑24, while the current betting duty rates remain unchanged.  In formulating this arrangement, we have given due consideration to the intense external competition facing by the local betting business.  The HKJC has also undertaken that the proposal would not reduce its commitment to local charities.

197. Moreover, in last year's Budget, I announced the introduction of a progressive rating system for domestic properties in 2024‑25.  Other than reflecting the "affordable users pay" principle, the new system will increase government revenue by about $760 million annually.

198. Taking into account the above new sources of revenue, total government revenue for 2023‑24 is estimated to be $642.4 billion. Of this, earnings and profits tax are estimated to be $263.7 billion, increasing by 6.4 per cent over the revised estimate for 2022‑23. Having regard to the Land Sale Programme and the land supply target of 2023‑24, revenue from land premium is estimated to be $85 billion, increasing by about 20 per cent over the revised estimate for 2022‑23. Revenue from stamp duty is estimated to be $85 billion, increasing by 27 per cent over the revised estimate for 2022‑23.

199. Taking into account the proceeds from issuance of government bonds of about $65 billion in 2023-24, I forecast a deficit of $54.4 billion for 2023-24.  Fiscal reserves will also decrease to $762.9 billion, equivalent to 12 months of government expenditure.

Other Taxation Issues

New International Tax Standards

200. In October 2021, the Organisation for Economic Co-operation and Development announced the international tax reform proposals to address base erosion and profit shifting (abbreviated as BEPS 2.0).  A global minimum effective tax rate of 15 per cent will be introduced on large multinational enterprise (MNE) groups with global turnover of at least 750 million euros.  Hong Kong will implement the global minimum effective tax rate in accordance with international consensus so as to safeguard our taxing rights and maintain the competitiveness of our tax regime.  The Government has been closely liaising with the trade in this regard while closely monitoring the implementation plan of other jurisdictions.  Hong Kong plans to apply the global minimum effective tax rate on these large MNE groups and implement the domestic minimum top-up tax starting from 2025 onwards.  It is estimated that this will bring in tax revenue of about $15 billion per year for the Government.  We will launch a consultation exercise to allow MNE groups to make early preparation.

Disposal of Equity Interests

201. We will strive to maintain our simple and low tax regime, the core competitiveness of Hong Kong, with a view to attracting more enterprises and talent to do business or pursue careers in Hong Kong.  In this regard, the Government will put forward an enhancement proposal in mid‑March to provide clearer guidelines on whether onshore gains on disposal of equity interests are subject to tax.  The initiative will not only facilitate business expansion and restructuring through disposal of equity interests, but also enhance tax transparency, lower the compliance cost of businesses, increase the competitiveness of Hong Kong's tax regime, and enhance the attractiveness of Hong Kong as an international investment and business hub.



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