Deloitte forecasts nearly $50b deficit
Deloitte expects Hong Kong growth in 2020 to range between negative 1 percent and zero and the government to record a deficit of HK$47.5 billion for the fiscal year. The estimated deficit is due to a drop in revenue from land sales, salaries tax and stamp duty - a total loss of HK$63...
Friday, February 14, 2020
Deloitte expects Hong Kong growth in 2020 to range between negative 1 percent and zero and the government to record a deficit of HK$47.5 billion for the fiscal year.
The estimated deficit is due to a drop in revenue from land sales, salaries tax and stamp duty - a total loss of HK$63 billion - and a rise in government expenditure.
Financial Secretary Paul Chan Mo-po estimated a fiscal surplus of HK$16.8 billion in February last year.
Deloitte expects the fiscal reserve to drop to HK$1.12 trillion by March 31.
In the following two to three fiscal years deficits are likely to be recorded and could expand to HK$60 billion for 2020-21, said Alfred Chan Fuk-san, a tax director for Deloitte China.
He expects government expenses to rise to HK$32 billion for the medical, social welfare and education sectors, including a HK$10 billion anti-epidemic fund.
Many corporations could record a profit drop during the economic downturn, with a HK$20 billion fall in profit taxes anticipated.
The profit tax bill was also issued later than in previous years, Chan added, with HK$70 billion in profit tax payment delayed until January.
Deloitte also suggested more relief measures for impacted business sectors, including tax exemptions for SMEs in the hotel, catering, retail and tourism industries.
For salaries tax, it suggested a 13.6 percent raise for basic allowance and married person's allowance to HK$150,000 and HK$300,000 respectively, and an 8.3 percent child allowance increase to HK$130,000 per child.
Rent allowances for residential homes were also recommended, with a limit of HK$150,000 per year.
The firm suggested a tax discount for enterprises that establish their headquarters in Hong Kong. For instance, companies could enjoy an 8.25 percent profit tax instead of the current 16.5 percent profit tax.
Although negative growth is expected for the first two quarters, the import and export trade business is predicted to be bullish due to easing trade war tensions, Chan said.
He added the economy bounced back after SARS in 2003 and the financial crisis in 2008 and it will recover if the government treats the next two to three years as a buffer period.
The Hong Kong Institute of Certified Public Accountants estimated the fiscal deficit could reach HK$18.1 billion while Ernst and Young estimated a HK$70 billion deficit this year.