Strong fiscal reserves reflect underlying strength of Hong Kong’s economy

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Targeted relief measures and continued expenditures in the 2022-23 Budget crucial to drive economic recovery; Strong government support highlighted as key to ensuring city’s long-term competitiveness amid the 5th wave of the pandemic

HONG KONG, Feb. 25, 2022 /PRNewswire/ — KPMG welcomes the Hong Kong SAR government’s budget (the "Budget") which will provide assistance to industries and individuals affected by the ongoing COVID-19 pandemic. Despite the forecasted budget deficit in 2022-23, the government’s fiscal reserves remain robust, underlining the resilience of the Hong Kong economy. 

John Timpany, Head of Tax in Hong Kong, KPMG China, says: "The forecast deficit is no cause for concern. The strong fiscal position gives the government plenty of capacity to respond to support Hong Kong through the current difficulties. Given the ongoing uncertainties in the global economy, we agree with the Financial Secretary that this is not the time to introduce new taxes, although the looming international tax changes will impact Hong Kong’s traditional low rate tax system."

Alice Leung, Tax Partner, KPMG China, says: "We welcome the issuance of HK$10,000 electronic consumption vouchers and are pleased to see that the first batch of vouchers will be issued quickly. In addition, since the pandemic is serious and people are not encouraged to go out to spend money, it is wise to issue the vouchers in April to coincide with the government’s estimate of when the epidemic will be contained. Although the recently announced unemployment rate remained at 3.9%, it is expected to rise in the next quarter due to the fifth wave of the epidemic and the lag in data. We therefore also welcome the Government’s decision to earmark HK$13.2 billion for the creation of time-limited jobs in both the public and private sectors under the Anti-epidemic Fund." 

Stanley Ho, Tax Partner, KPMG China, says: "While we welcome the measures proposed in the Budget to support businesses (for example, profits tax relief), we suggest that the Government continue to monitor the pandemic and economic development by considering the one-off "negative tax rate" measure we previously proposed, which would provide a one-time subsidy (i.e., capped at about HK$100,000) for the first HK$600,000 of tax losses incurred by eligible businesses. We welcome the proposed introduction of a tax incentive regime for family offices and the half tax concession to attract more maritime enterprises to establish a presence in Hong Kong. We believe the proposals will enhance the attractiveness of Hong Kong and create more business and employment opportunities for these industries."

KPMG also urged that the Government continue to monitor the epidemic and economic development by considering several measures that it has proposed before, including a 3-month delay in the payment of provisional salaries tax and a 50% waiver of provisional salaries tax. Meanwhile, it welcomed the Government’s adoption of its proposal to provide a tax deduction for domestic rental expenses in support of salaries taxpayers.

About KPMG China 

KPMG China is based in 31 offices across 28 cities with over 14,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Dalian, Dongguan, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Taiyuan, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located. 

KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited ("KPMG International") operate and provide professional services. "KPMG" is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively. 

KPMG firms operate in 145 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities. 

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In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multidisciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.