In his Budget speech today, Financial Secretary Paul Chan said the revised estimate of total government revenue in 2025-26 is about $688.8 billion, higher than the original estimate by 4.5%. Fiscal reserves are expected to be $657.2 billion at end-March 2026.

Supporting citizens, enterprises

To relieve the economic pressure faced by citizens and enterprises, Mr Chan – having taken into account the Government’s fiscal position this year – proposed a number of measures in the 2026-27 Budget:

(a) provide rates concession for domestic properties for the first two quarters of 2026-27, subject to a ceiling of $500 for each rateable property ‒ this measure is estimated to involve about 3.15 million domestic properties and reduce government revenue by about $3.1 billion;

(b) provide rates concession for non-domestic properties for the first two quarters of 2026-27, subject to a ceiling of $500 for each rateable property ‒ this measure is estimated to involve about 440,000 non-domestic properties and reduce government revenue by about $400 million;

(c) reduce salaries tax and tax under personal assessment for the year of assessment 2025-26 by 100%, subject to a ceiling of $3,000 ‒ the reduction will be reflected in the final tax payable for the year of assessment 2025-26, benefitting about 2.12 million taxpayers and reducing government revenue by about $5.3 billion;

(d) reduce profits tax for the year of assessment 2025-26 by 100%, subject to a ceiling of $3,000 ‒ the reduction will be reflected in the final tax payable for the year of assessment 2025-26, benefitting about 171,000 businesses and reducing government revenue by about $500 million; and

(e) provide an allowance for eligible social security recipients, equal to one month of the standard rate Comprehensive Social Security Assistance payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance, while similar arrangements will apply to recipients of the Working Family Allowance, altogether involving an additional expenditure of about $6.5 billion.

In addition, starting from the year of assessment 2026-27, the Budget proposed:

(1) increasing the basic allowance and single parent allowance from $132,000 to $145,000, and the married person’s allowance from $264,000 to $290,000, benefitting about 2.09 million taxpayers and reducing tax revenue by about $3.56 billion a year;

(2) increasing the child allowance and additional child allowance from $130,000 to $140,000, benefitting about 360,000 taxpayers and reducing tax revenue by about $680 million a year; and

(3) increasing the allowance for maintaining a dependent parent or grandparent, and raising the deduction ceiling for elderly residential care expenses ‒ these measures will benefit about 830,000 taxpayers and reduce tax revenue by about $970 million a year.

Specifically, the allowance for maintaining a dependent parent or grandparent aged 60 or above will be raised from $50,000 to $55,000. The same increase applies to the additional allowance for taxpayers residing with these parents or grandparents.

Meanwhile, the allowance for maintaining a dependent parent or grandparent aged 55 to 59 will be increased from $25,000 to $27,500. The same increase applies to the additional allowance for taxpayers residing with these parents or grandparents.

Furthermore, the deduction ceiling for elderly residential care expenses will be adjusted, from $100,000 to $110,000, for taxpayers whose parents or grandparents are admitted to eligible residential care homes.

Government revenue

On government revenue, Mr Chan said: “Due to a buoyant equity market and an accelerated economic growth, the revenue estimate from stamp duties is revised to $99.5 billion, an increase of about $31.9 billion from the original estimate. Revenue from profits tax has increased by about $16.8 billion while that from salaries tax remains stable, with the revised estimates at $209 billion and $97 billion respectively, demonstrating the strong resilience of Hong Kong’s economy.

“However, as the residential property market has just stabilised while the commercial property market remains relatively sluggish, government revenue from land premium stays low with the revised estimate at $17.5 billion, lower than the original estimate by $3.5 billion.”

Government expenditure

The finance chief said the revised estimate of total government expenditure for 2025-26 is $789.2 billion, lower than the original estimate by $33.1 billion. Of this, recurrent expenditure is $572.4 billion, lower than the original estimate by $15.7 billion.

The Operating Account for 2025-26, which was originally estimated to record a deficit of about $3 billion, will register a surplus of $51.3 billion. The Capital Account will record a deficit due to low revenue from land premiums, coupled with high capital works expenditure to cater for the accelerated development of the Northern Metropolis and other public works projects.

Factoring in the issuance of government bonds of $155 billion and repayments of $51.7 billion, it is expected that the Consolidated Account will register a surplus of $2.9 billion instead of a deficit of about $67 billion as originally estimated.

Separately, the major policy initiatives announced in the 2025 Policy Address involve $7.4 billion in operating expenditure, $32 billion in capital expenditure and $20 billion in financial commitments. There will be about $1.3 billion in revenue forgone. The financial implications of such initiatives have been reflected in the estimates for 2026-27.

Total government expenditure for 2026-27 will increase by about 6.9% to $843.4 billion, with its ratio to nominal gross domestic product projected to be 24.2%.

Recurrent expenditure for 2026-27 will increase by 4.8% to $599.7 billion. Of this, substantial resources will continue to be allocated to livelihood-related policy areas including healthcare, social welfare and education, involving a total of $357.1 billion and representing about 60% of recurrent expenditure. Non-recurrent expenditure will increase by 36.9% to $40.5 billion.

Total government revenue for 2026-27 is estimated to be $765.2 billion. A consolidated surplus of $22.1 billion is expected for the year, and the fiscal reserves will rise to $679.3 billion.

Medium Range Forecast

In the Medium Range Forecast spanning 2026-27 to 2030-31, a real economic growth rate of 3% is adopted. The finance chief expects that there will be a surplus in the Operating Account for each of the next five years, while the Capital Account will still record a deficit due to expenditure on infrastructure. After taking account of net proceeds from the issuance of bonds, the Consolidated Account will register a surplus in each of the next five years.

Fiscal reserves are estimated at $733.7 billion by the end of March 2031, representing 17.3% of gross domestic product, or equivalent to about 10 months of government expenditure, he added.