Hong Kong Policy Address:Starting a new chapter

Yesterday, Chief Executive (CE) of the Hong Kong SAR, Carrie Lam, delivered hermaiden Policy Address to the Legislative Council (LegCo). With little surprise, theprimary focus of the Policy Address was to alleviate the burdens on the public. Theimminent issues of housing were addressed, and changes to taxation and thegovernment’s structure were also proposed. Lam thinks Hong Kong’s economy issound and expects GDP to grow by more than 3.5% in 2017, in line with the currentofficial government forecast of 3-4%, and above the long-term growth rate of 2.9%.

    Introducing the “Starter Homes” pilot scheme aims to provide affordable housingfor first-time buyers who are priced out of the private property market.

    To increase home ownership in Hong Kong, the government is planning tosubstantially increase the supply of units under the Green Form SubsidisedHome Ownership Scheme (GSH).

    The government proposes to introduce a two-tiered corporate tax system, withthe tax rate on the first HKD2m of profits reduced to 8.25%. Profits above thatamount will be taxed at the standard profit tax rate of 16.5%.

    An additional tax break will be given to companies that spend on R&D. The firstHKD2m of R&D spending is eligible for a 300% tax deduction; R&D spendingabout HKD2m is eligible for a 200% tax deduction.

    In terms of public finances, the government said it is in a position to use theaccumulated fiscal reserves prudently (currently at HKD1,000bn) to invest for thefuture of the city, as well as to alleviate the burdens on the public.