Hong Kong Residents to See Unexpected Tax Waiver

March 3, 2011 Taxation in Hong Kong

john-tsang-handout2Hong Kong residents can look forward to a HKD 6000 cash handout and a significant income tax waiver, under the government’s newly pronounced budget plans.

On March 2nd the Hong Kong Financial Secretary John Tsang announced an unexpected revision to the recently released government budget, revealing that all permanent resident of Hong Kong over the age of 18 years will now be eligible to receive a onetime HKD 6 000 (approx. USD 770) cash payment. Recipients will be able to withdraw the entire amount in one sum if they wish, although the Minister said that measures will be instated encouraging people to save. In addition John Tsang announced that 75 percent of a resident’s annual personal income tax liability would now be waived, with the maximum tax discount amounting to HKD 6 000 (approx. USD 770). The Minister claimed that a further financial assistance program will be instated in the near future to provide relief to unemployed individuals.

The two new measures come as a replacement to a handout that was revealed in last week’s budget announcement, whereby each taxpayer would receive HKD 6 000 which would automatically be deposited in a Mandatory Provident Fund or pension account. The Financial Secretary explained the turnaround, saying, “…after putting out my budget I discovered that some policies didn’t receive public support and now I’ve heard these voices.”

According to forecasts released by the Bank of East Asia, the twin measures could increase private consumption in Hong Kong by approximately 1.4 percent in 2011. It is expected that the program will cost the Hong Kong government HKD 36 billion (approx. USD 4.6 billion).

Photo by Vox Asia