Hong Kong's Post COVID Budget 2022/23: A Glimmer of Light at the end of Tunnel?

Hong Kong Budget 2022/23: A Glimmer of Light at the end of Tunnel? - Hong Kong's Post COVID Budget, Tricor Reveals

The Financial Secretary, the Hon Mr. Paul MP Chan, delivered the 2022/23 Hong Kong SAR Budget on 23 February 2022. Budget 2022/23 details a somewhat ambitious attempt to address a wide array of issues and challenges but is mainly focused on pandemic relief and public health measures. There are rental protections for small business, higher taxes for landlords with multiple properties and major Corporations and more consumption vouchers for everyday residents.

Tricor shared with people its 2022/23 Hong Kong Budget Commentary which outlines the key proposal of the Budget and its Insights.

Further to the wish list for the Budget (http://3cor.in/22BudgetWishList) earlier, Tricor's Global Head of Tax, Chee Weng Lee shares his insights on the 2022/23 Budget and the implications on individuals and enterprises:

Given the challenges Hong Kong is encountering during the 5th wave of the Covid-19 Pandemic, Budget 2022/23 is positioned as providing some sense of relief once the Pandemic is hopefully put under some control.

The Financial Secretary delivered an expansionary budget against the backdrop of an economy faced with slower growth, global political situations, tighter monetary policies globally, supply chain bottlenecks and cross border travel restrictions causing a dampening effect on the recovery of the economy. It is against such a perfect storm that the 2022/23 Budget attempts to provide "A glimmer of Light at the end of the tunnel" with the objectives of stimulating the local economy, protecting jobs and livelihoods as well as to pave the journey for the post pandemic economic recovery.

The array of several short-term measures such as the rental relief measures to ease the financial burden of the hundreds of thousands of Small and Medium Enterprises is somewhat akin to the one implemented by Singapore in 2020 albeit that came attached with conditions. The Consumption Vouchers are welcome, but a cash voucher of an equivalent amount would be preferred.

From a medium and longer term perspective, announcing moves to tap into the potential opportunities from the Mainland's 14th Five Year Plan such as strengthening Hong Kong's role as a global offshore RMB business hub is a move in the right direction. We look forward to hearing more details regarding the Financial Secretary's proposals to encourage innovation technology, financial services and to take advantage of the GBA's opportunities to paving ways for future economic growth after the epidemic.

Under the OECD's Base Erosion and Profit Shifting 2.0, the Financial Secretary's reaffirmed Hong Kong's territorial source principle of taxation hence "preserving" the simplicity, certainty and transparency that comes along with it. Additionally, to safeguard Hong Kong's taxing rights, he announced the possible introduction of a domestic minimum top-up tax in respect of the global minimum tax rate starting from 2024/25 to ensure that the effective tax rates reach the global minimum rate of 15%. These initiatives are a must to ensure that Hong Kong continues to be relevant in the new international tax order. We are sure that the Financial Secretary will continue to address what actions Hong Kong has to adopt to ensure that we are no longer on the European Union grey list of Unco-operative Tax havens.

We certainly welcome the Financial Secretary's offer of tax concessions for eligible family investment management entities to attract Family offices to continue to remain and for new entrants to be established in Hong Kong. Hopefully, the magnitude of such tax incentives must be more attractive that what is already on offer by other countries.

Additionally, to enhance the long-term competitiveness and attractiveness of Hong Kong, we would like to see the Government consider and introduce group tax relief and allow carry-back of tax losses. The Financial Secretary raised the need to broaden revenue sources for the long-term financial stability of Hong Kong and we think Hong Kong has to address this in the not too distant future.