Budget braces for tough times ahead
February 01, 2012
Financial Secretary John Tsang today unveiled a raft of proposals to improve people’s livelihood, enhance Hong Kong’s competitiveness and support businesses amid uncertainty in the global economy.
In his 2012-13 Budget address, the Financial Secretary said Hong Kong’s economy grew 5% in 2011, but he forecast GDP growth to slow to between 1% and 3% for 2012, mainly due to the sluggish European and US economies.
“I shall introduce measures worth nearly $80 billion in this year’s Budget to better prepare our people for the difficult time ahead,” Mr Tsang said.
“Besides supporting enterprises and people in meeting challenges, these measures will help ease the burden of inflation on people.
“This is a strong package of measures and would help stimulate the economy 1.5 percentage points in 2012.”
Relief measures
The Financial Secretary forecast an operating surplus of $38.2 billion and a surplus of $66.7 billion in the Consolidated Account for the 2011-12 financial year, equivalent to 3.5% of GDP.
More land sales and better-than-expected income from tax revenues were the main reasons for the surplus, he said.
His proposed relief initiatives include:
* reducing salaries tax and tax under personal assessment by 75% up to a ceiling of $12,000 for the 2011-12 tax year, at a cost of $8.9 billion;
* raising the basic salaries tax allowance to $120,000, the married persons’ allowance to $240,000, and the child allowance to $63,000;
* waiving rates for 2012-13 capped at $2,500 per quarter for each rateable property, at a cost of $11.7 billion;
* an electricity subsidy of $1,800 for each residential account; and
* an extra one month’s allowance to recipients of Comprehensive Social Security Assistance, Old Age Allowance and Disability Allowance.
“The headline inflation rate for 2012 is estimated at 3.5% after taking account of the effects of the one-off measures,” Mr Tsang said.
Business bolstered
To help the business sector weather the anticipated economic downturn, he proposed enhancing the existing financing guarantee scheme for small and medium enterprises, introducing new policy terms under the Hong Kong Export Credit Insurance Corporation, waiving business registration fees for 2012-13 and reducing profits tax for 2011-12 by 75% up to a maximum of $12,000.
Capital duties levied on local companies will be scrapped, and the charges for import and export declarations will be halved, at a cost of $840 million.
He said the Mortgage Corporation will introduce a microfinance pilot scheme with a $100 million cap on loan amounts, and up to five years to repay the loan.
To help Hong Kong nurture talent for the future, Mr Tsang announced $10.5 billion worth of funding initiatives in the education sector, including $5 billion to enhance tertiary institutions’ academic and research development, and $2 billion to establish more scholarships and award schemes.
Infrastructure boost
To strengthen social capital, the Budget proposes injecting $200 million into the Community Investment & Inclusion Fund.
Another $100 million is earmarked to support the operation of the Hong Kong Design Centre for the next three years. The Government will also sponsor signature events for 2012, designated “Hong Kong Design Year”.
Capital works expenditure for the next financial year will reach $62.3 billion and increase to more than $70 billion in the next few years to support Hong Kong’s infrastructural development programme.
Another $220 million is set aside for the Construction Industry Council to enhance manpower training.
The Government will also increase funding support for sports associations to almost $250 million. Another $150 million has been earmarked for the Mega Events Fund to extend its operation by five more years.
Second iBond issue
The Monetary Authority will issue another iBond worth not more than $10 billion under the Government Bond Programme.
With a maturity of three years, it will target Hong Kong residents, with interest to be paid to bond holders every six months at a rate linked to the inflation of the last half-year period.
“In the long run, we need to leave room for developing other kinds of bonds, including conventional fixed-rate bonds, for the development of a more mature bond market in Hong Kong,” Mr Tsang said.
He reiterated the Government’s resolve to increase the supply of land and create a land reserve, noting sites on which more than 20,000 private residential units can be built were provided in the 2011-12 financial year, meeting Government targets.
He estimated that aggregate land supply for 2012-13 will provide 30,000 private residential flats.
“In the Land Sale Programme for 2012-13 to be announced tomorrow, we shall include in the Application List 47 residential sites, of which half are new sites,” Mr Tsang said, adding they will provide 13,500 units.
While predicting choppy economic waters ahead, Mr Tsang said Hong Kong people will rise to the challenge.
“We may not always see eye-to-eye with each other on how to deal with the difficulties we face, but working together we have always been able to find ways to develop Hong Kong into a better place.”
