The Financial Secretary of Hong Kong (“FS”), Mr. Paul Chan Mo-po, announced his budget for 2018/19 yesterday, providing a blueprint for the long-term development of Hong Kong. As explained by FS, the main objectives to be achieved are (1) to diversify Hong Kong’s economy; (2) to invest for the future; and (3) to share with the people of Hong Kong at large the fruitful economic achievements of Hong Kong for the past few years.
Some of the key features are outlined below:-
|Key features||OLN’s observations/ comments|
|Innovation and Technology||– Set aside HK$20 billion for the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop.|
– Inject HK$10 billion into the Innovation and Technology Fund to support applied research and development.
– Earmark HK$10 billion for the establishment of two research clusters on healthcare technologies and on artificial intelligence and robotics technologies.
– Allocate HK$10 billion to upgrade facilities of the Science Park and enhance support for enterprises in the Park.
– Allocate HK$200 million to Cyberport toenhance support for start-ups.
|We welcome the government’s recognition for and the setting aside of funds for the development of innovation and technology, which shall be a driving force for the Hong Kong’s economy.|
We believe that with properly formulated policies, the start-ups and enterprises in the industry will have more funding and incentive to undergo more research and development and make Hong Kong a more competitive region for healthcare technologies and on artificial intelligence and robotics technologies.
We hope to see more favourable tax treatments to be in place so that the intellectual property rights resulting from the research and development would stay in Hong Kong and further diversify the economy.
Please refer to our article “How to Catch the Candies for Start-ups in Innovation and Technology under the Budget 2018-2019” for a more detailed discussion.
|Tourism||Allocate HK$226 million for the Hong Kong Tourism Board to implement the Development Blueprint for Hong Kong’s tourism industry to broaden markets and attract high value-added overnight visitors.||Whilst we appreciate the government and the industry’s effort in attracting more visitors to Hong Kong (especially those high value-added overnight visitors), we await to any concrete plans or measures to resolve some of the key issues facing hotel and tourism development in Hong Kong, for example, human capital, infrastructure, tourism attractions and activities.|
|Trading and Logistics Industry||Expand trade, investment and tax treaty networks to open up new markets.||We are happy to see the government’s continuous emphasis and effort on expanding Hong Kong’s tax treaty networks, as evidenced by the many DTAs or double tax agreements concerning aviation and shipping income over the past few years.|
We expect to see Hong Kong to conclude and sign more DTAs with countries along the Belt and Road to provide a more favourable tax environment for Hong Kong enterprises doing business in those countries.
|Business and Professional Services||– Enhance the network of Economic and Trade Offices to .|
– Provide a total of HK$250 million to Hong Kong Trade Development Council to assist local enterprises in seizing opportunities arising from the Belt and Road Initiative and Bay Area, and to promote development of e-commerce.
|We strongly believe that Hong Kong enterprises, especially those in the finance, accounting, legal, engineering, management and architecture sectors can substantially benefit from Belt and Road initiatives and opportunities. |
We hope to see more tax treaties and investments agreements to be concluded and signed by Hong Kong and those countries along the Belt and Road. Hong Kong enterprises can play a major role in those initiatives. We also expect to see more companies to be set up by foreign investors in Hong Kong who wish to benefit from those initiatives.
|Creative Industries||Inject HK$1 billion into the CreateSmart Initiative to support development of the creative industries.||Please refer to our observations/ comments above.|
|Caring and Sharing|
|Abolishing the MPF “offsetting” arrangement||The Government is striving to put forth as soon as possible a proposal to effect the abolition of the MPF “offsetting” Severance Payment or Long Service Payment against MPF Contributionsarrangement and will set aside HK$15 billion in relation to its financial commitment.||Hong Kong employers shall keep an eye on the continuous development on this topic as it might potentially increase their labour costs and evaluate the impact sooner rather than later.|
|Reducing Tax Burdens on Individuals||Various tax measures to alleviate the tax burden on salary earners.||Please refer to our article “Are you getting your slice of the “generous” tax measures as outlined in the 2018/2019 Hong Kong Budget?”for a detailed discussion of the various tax measures.|
|Tax Concessions for Eligible Energy Efficient Building Installations||The Government will enhance tax concessions for capital expenditure incurred by enterprises in procuring eligible energy efficient building installations and renewable energy devices by allowing tax deduction to be claimed in full in one year instead of the current time frame of five years.||We welcome the incentivized measure on “green operation” and urge the government to provide more incentives to encourage the Hong Kong business sector to have a “green operation”, including, for example, by providing extra tax deduction or allowances.|
OLN has tax advisors who have dual qualification in both accounting and law. We are happy to assist on any matters as mentioned above.