Enter The Tsandman: “Tsang”bagging and Sweet Dreams

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The Financial Secretary John Tsang, announced the 2015-2016 Budget this morning in a televised event at the Legislative Council. Once again, the Financial Secretary sandbags the budget and offers sweet measures for the middle class and welfare recipients.  

The budget revealed a new (though previously touted) Future Fund, which would allow the Government to save up in anticipation of a structural deficit within the next ten years, and also included one-time relief measures amounting to $34 billion.


A tactic used to hide or limit expectations of a company’s or individual’s strength in order to produce greater than anticipated results.

The Financial Secretary also announced a series of support measures to sectors affected by the Occupy Movement last year.


As anticipated in the build up to the Budget, the Financial Secretary announced he has agreed to create a new “Future Fund” which will serve as long-term savings and be placed in long-term investments for higher returns. Mr Tsang said the Secretary for Financial Services and the Treasury will work with the Chief Executive of HKMA to “hammer out” specific management and investment mechanisms.

According to suggestions made by the Working Group on Long-Term Fiscal Planning, the Fund would potentially comprise an endowment of $220 billion from the Land Fund, an a proportion of future budget surpluses.

Government sources refused to disclose further confirmation or details, merely conceding that the departments will hash out the necessary mechanisms within the year.


The Sandman brings sweet dreams to children everywhere and the Financial Secretary is hoping to put political opposition to sleep with popular measures. As the Financial Secretary himself had mentioned on a radio show before the Budget announcement, speculative reports from the media were “a little bit off”. Relief measures amounted to $34 billion – a whopping $10 billion more than what was expected.

The Relief Measures will benefit:

Those on Government Support

  • – Two months worth of extra allowance to Comprehensive Social Security Assistance (CSSA), Old Age Allowance, Old Age Living Allowance and Disability Allowance recipients respectively.
  • – One month’s rent for lower income tenants living in the rental units of the Hong Kong Housing Authority (HKHA) and the Hong Kong Housing Society (HKHS).


  • – A 75% reduction in salaries tax and tax under personal assessment, and profit tax. Any reduction will be capped at $20,000.  The one-time tax cut will be reflected in the final tax payable for 2014-15. These measures will benefit 1.82 million and 130,000 taxpayers respectively.
  • – An increase basic and additional child allowances from $70,000 to $100,000

Property Owners

  •  – A waiver of rates for the first two quarters of 2015-2016, subject to a ceiling of $2,500 per quarter for each rateable property. This will apply to 3.15 million properties.

Business Owners

  • – Small and Medium Enterprises (SMEs) will also benefit as a result of the FS’s Budget. The FS announced a $1.5 billion injection into the SME Export Marketing and Development Funds and an increase in the maximum amount of funding support for each project under the SME Development Fund from $2 million to $5 million.

Occupy Dreams

Like his boss (the CE), The Tsandman addressed the dreams of Occupy Movement participants in his speech. Unlike his boss, his words were much less threatening. He acknowledged that the event showed “most people do care dearly for our home, Hong Kong” and in his closing remarks recognised that “our younger generations in particular, are hungering for spiritual contentment” and not just “material fulfillment”.

Nonetheless, Tsang also said, “Prolonged political bickering is detrimental to public administration and the international image of Hong Kong as a stable, law-abiding and efficient city”, and announced a number of support measures targeted to sectors affected by the Occupy Movement to “varying degrees”. The series of support measures and promotion efforts will cost $180 million.

The Targeted Support Measures include:

  • – A waiver of licence fees for 1800 travel agents, and 2000 hotels and guesthouses for six months;
  • – A waiver of  the licence fees for restaurants and hawkers and fees for restricted food permits for six months, benefitting 26,000 restaurants and operators in total;
  • – A one-off waiver of the fees for vehicle examination for commercial vehicle such as taxis, non-franchised buses, and good vehicles;
  • – An allocation of an additional $80 million for the  HKTB to “step up” its promotion efforts in the coming year.



What the media did get right, was that 2014-15 saw a surplus of more than $60 billion – $63.8 billion to be exact. This was much higher than Tsang had estimated in his last budget. The Financial Secretary explained that stamp duty revenue is $29.7 billion higher than the original estimate, of which 75% comes from “double stamp duty”. Revenue from profits tax is 15.8% higher than original estimates, amounting to an additional $18.5 billion.

Budget Year Projection in the Budget (in billions) Actual Surplus Difference
08/09 -7.5 18.0 25.5
09/10 -39.9 13.8 53.7
10/11 -25.2 71.3 96.8
11/12 3.9 66.7 62.8
12/13 -3.4 64.9 68.3
13/14 -4.9 12.0 16.9
14/15 9.1 63.8 54.7

Surplus projection vs actual surplus in recent Budgets.

The FS did not directly address the double stamp duty, but he did warn that, while there has been a double-digit increase in the prices of small and medium-sized flats, he “will not hesitate to introduce measures when necessary, in order to maintain the healthy and stable development of the property market and safeguard the stability of our macroeconomic and financial systems.”

The FS forecasted  Gross Domestic Product (GDP) growth at 1 to 3%, and estimates that next year’s budget will see a surplus of $36.8 billion, but warned that a structural deficit could occur within the next ten years, due to an aging population and slowing growth.

He also suggested that, while the community rejected the notion of a Goods and Service Tax in the past, the Government may explore the feasibility of broadening the tax base again, even as he narrowed it by increasing exemptions.

There was much to like for many in the budget, excepting those looking for more – a Universal Pension scheme or permanent tax cuts, for example.  There will no doubt be more criticism over an excessive surplus and hoarding (through the Future Fund). However, many will sleep well tonight and be grateful for increases in tax and fee exemptions, corporate welfare in the form for of increased funding for agriculture and film, and personal welfare in increased payments for those on CSSA and other government programmes. The Tsandman himself will sleep well tonight, having held his line on saving for a demographic apocalypse and structural deficits he sees on the Hong Kong horizon.

Please find a summary of key numbers on the next page, courtesy of the Information Services Department.