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Deficit miss raises hopes on handouts

Natalie Ngan

Friday, February 01, 2013

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Financial Secretary John Tsang Chun-wah may be compelled to give away sweeteners in his next budget as the government surplus is poised to exceed HK$40 billion.

Tsang will deliver his budget speech on February 27. Authorities revealed yesterday that Hong Kong had already accumulated a net fiscal surplus of HK$39.97 billion for the nine months to December 31, trashing the government's estimate of a HK$3.4 billion deficit for the 2012-13 financial year.

Fiscal reserves stood at HK$709.1 billion as at December 31.

Tsang has been lashed by citizens and lawmakers for consistently underestimating the financial position in the past five years. The surplus is set to rise as salaries tax came into the coffers last month and it is likely to be above most private-sector estimates.

Ernst & Young said in November that it expected a budget surplus of HK$8.6 billion for the current fiscal year.

The Hong Kong Institute of Certified Public Accountants predicted a surplus of HK$25.6 billion, and a healthy fiscal reserve of HK$694.7 billion by March.

Deloitte estimated a HK$60 billion surplus due to land sale income and recommended authorities not give any cash sweeteners as it did in the last fiscal year when permanent residents above the age of 18 received HK$6,000.

KPMG tax partner Jennifer Wong Wan How-yee still expects the surplus to be less than HK$40 billion. "The government's main source of income is profits tax, which was collected from corporations in November. Although it will receive salaries tax in January, that will be relatively small and not enough to cover the regular expenses per month on average."

Wong does not expect the government to offer any more cash rebates.

She said the authorities must prepare for a large budget as total expenditure is likely to be big in the 2013-14 financial year, according to guidelines set by Chief Executive Leung Chun- ying during his inaugural policy address on January 16.

Legislators, meanwhile, have a wish list for spending the surplus.

"The government should consider reevaluating its benchmark for estimating the budget, due to repeatedly underestimating the data," said Starry Lee Wai-king, who is also an executive councillor and accountant by training.

"Short-term relief measures should also be considered, such as tax refunds for the middle-income group, and one- month rent rebate for public housing tenants."

Lee, vice chairwoman of the Democratic Alliance for the Betterment and Progress of Hong Kong, added: "It will be difficult for the public to accept the government not providing any short- term relief measures with such a huge surplus."


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