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The 2023-24 budget was released today, 22 February 2023, by Hong Kong's financial secretary, with the following key highlights:
Economic Performance
In 2022, Hong Kong's economy experienced a 3.5% decline in GDP growth. The unemployment rate stood at 4.3% with an underemployment rate of 2.3%. The headline inflation rate was 1.9% while the underlying inflation rate was 1.7%.
The economic prospects for 2023 are expected to grow between 3.5% to 5.5%. The headline inflation rate is forecasted to be 2.9%, while the underlying inflation rate is projected to be 2.5%.
Revenue and Expenditure
The government's total revenue for 2023-24 is estimated to be HK$642.4 billion (EUR76.8 billion). The main contributors are profits tax (HK$170b), land premium (HK$85b), stamp duties (HK$85b), salaries tax (HK$83b), investment income (HK$66.4b), and other revenue sources (HK$153b). The government's total expenditure for 2023-24 is estimated to be HK$761 billion (EUR91 billion), with the largest allocations for social welfare ($129b), health ($124.8b), education ($114.7b), infrastructure ($88.7b), economic development ($70.5b), and security ($66b), and smaller portions for environment and food ($46.6b) and others, including support, community and external affairs, and housing ($120.7b). The consolidated deficit for 2022-23 is forecasted to be $139.8 billion while the forecast deficit for 2023-24 is $54.4 billion. The fiscal reserves are expected to be $817.3 billion (EUR 97.8 billion) by 31 March 2023.
Initiatives
The government plans to introduce a special football betting duty of HK$2.4 billion annually on the Hong Kong Jockey Club for five years starting in 2023-24. It also plans to expand the Government Green Bond Programme to cover sustainable finance projects and establish an Infrastructure Bond Scheme to manage the cash flow needs of major infrastructure projects better. The government announced that it would adhere to the fiscal discipline of keeping expenditure within the limits of revenue, and bond issuance proceeds would not be used for funding recurrent expenditure.
Reviving the Economy
To speed up economic recovery, support people and businesses, and open up new horizons for long-term development, the government announced to provide over HK$250 million for organising and promoting major tourism events, about HK$300 million for staging more mega and MICE (meetings, incentives, conventions, and exhibitions) events, and HK$50 million for stepping up promotion and branding of Hong Kong. The government will introduce a new mechanism to facilitate companies domiciled overseas for re-domiciliation to Hong Kong, and a new Capital Investment Entrant Scheme to attract people to live and pursue development in Hong Kong after investing a certain amount in the local asset market (excluding property).
Electronic Consumption Vouchers
The government will issue HK$5,000 (EUR598) electronic consumption vouchers to each eligible Hong Kong permanent resident and new arrival aged 18 or above, disbursed in two amounts of HK$3,000 and HK$2,000 starting from April. Eligible people who have come to work or study in Hong Kong through different admission schemes will receive HK$2,500 vouchers.
Relieving People's Hardship
The government is taking several measures to ease the financial burden of taxpayers. These include a full exemption of salaries tax for assessment year 2022/23, with a maximum limit of HK$6,000. The Public Transport Fare Subsidy Scheme will be extended for another six months from April until October 2023, and eligible recipients of certain welfare payments will receive a supplementary half-month allowance. Additionally, each eligible residential electricity account will receive a HK$1,000 subsidy. The basic and additional child allowances will also be raised from HK$120,000 to HK$130,000 for the year of assessment 2023/24.
Supporting Enterprises
The government of Hong Kong has announced several measures to support enterprises. These measures include a full exemption of profits tax for the assessment year 2022/23, with a limit of HK$6,000, a rates concession of up to HK$1,000 per quarter for non-domestic properties for the first two quarters of 2023/24, additional funding of HK$550 million for the Hong Kong Trade Development Council to help enterprises expand their markets, an extension of the application period for guarantee products under the SME Financing Guarantee Scheme until March 2024, and the availability of fully guaranteed loans for eligible passenger transport operators and licensed travel agents starting from April 2023.
Information & Technology
The government plans to conduct a feasibility study for an AI supercomputing center and allocate funds for research centers related to life and health technology, basic research in fields like AI and quantum technology, a digital transformation support program for SMEs, and a microelectronics research and development institute. They will also allocate funds for Cyberport to support smart living start-ups, a corporate venture fund, and a Co-acceleration program. Additionally, they will provide funding for the development of the Web3 ecosystem, introduce a "patent box" tax incentive, and organize an International GreenTech Week.
Financial Services
The Hong Kong government is taking steps to attract more family offices and improve the financial services sector, providing HK$100 million to attract more family offices. This also includes introducing an advanced technology company listing regime, consulting on specific recommendations for the GEM market, and exploring ways to expand mutual market access with mainland China. Additionally, visitors from Hong Kong and Thailand can use local payment systems in each other's countries. Finally, the government plans to issue a minimum of HK$50 billion in Silver Bonds and HK$15 billion in retail green bonds in 2023-24.
Aviation and Maritime
The Hong Kong government is introducing several measures to boost the aviation and maritime industries in the region. This includes enhancing the tax regime for aircraft leasing, increasing training places for the youth aviation industry internship program, reserving funds for maritime service industry studies and exchanges, injecting HK$200 million into the Maritime and Aviation Training Fund, as well as expanding Hong Kong Maritime Week.
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
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