Budget Speech by the Financial Secretary (10)

*********************************************

Support for Employment

181. To encourage employers to hire job seekers with special employment needs, I will make an additional annual funding of $48 million to enhance the special employment programmes of the Labour Department. These initiatives include:

(a) providing an on-the-job training allowance of up to $4,000 per month for a period of six to 12 months for employers engaging people aged 60 or above who have left the workforce or are unemployed;

(b) raising the monthly on-the-job training allowance ceiling under the Youth Employment and Training Programme by $1,000 to $4,000 per month for a period of six to 12 months; and

(c) extending the work adaptation period under the Work Orientation and Placement Scheme from two months to three months and increasing the maximum amount of allowance payable to employers engaging people with disabilities by $16,000 to $51,000.

Government Outsourcing System

182. The employment rights of non-skilled workers employed by government service contractors is a matter of great concern to the Government. The inter-bureaux/departmental working group set up by the Secretary for Labour and Welfare is exploring options to improve the government outsourcing system with a view to enhancing the protection of the reasonable employment terms and conditions as well as labour benefits of these non-skilled employees. It is expected that the working group will complete the review within this year. I will provide the necessary financial support having regard to the outcome of the review.

Abolishing the Arrangement for "Offsetting" Severance Payment or Long Service Payment against MPF Contributions

183. To effect the abolition of the MPF "offsetting" arrangement, the Government is striving to put forth as soon as possible a proposal which is more acceptable to both employers and employees and will consult major stakeholders. The Government has clearly indicated its willingness to increase its financial commitment, and I will set aside $15 billion for these measures.

Reducing Tax Burdens on Individuals

184. We are working towards the implementation of the two-tiered profits tax rates system. To alleviate the tax burden on salary earners, I propose to implement the following measures starting from the year of assessment 2018-19:

(a) widening the tax bands for salaries tax from the current $45,000 to $50,000, increasing the number of tax bands from four to five, and adjusting the marginal tax rates to 2 per cent, 6 per cent, 10 per cent, 14 per cent and 17 per cent respectively. These measures will reduce the tax burden of 1.34 million taxpayers and reduce tax revenue by $4.09 billion a year;

(b) increasing the basic and additional child allowances from the current $100,000 to $120,000. This will benefit 335 000 taxpayers and reduce tax revenue by $1.31 billion a year;

(c) increasing the allowances for maintaining a dependent parent or grandparent. This will benefit about 607 000 taxpayers and reduce tax revenue by about $580 million a year. I will make the following three adjustments:

* increasing the allowance for maintaining a dependent parent or grandparent aged 60 or above from the current $46,000 to $50,000. The same increase applies to the additional allowance for taxpayers residing with parents or grandparents continuously throughout the year;

* increasing the allowance for maintaining a dependent parent or grandparent aged between 55 and 59 from the current $23,000 to $25,000. The same increase applies to the additional allowance for taxpayers residing with parents or grandparents continuously throughout the year; and

* raising the deduction ceiling for elderly residential care expenses from the current $92,000 to $100,000 for taxpayers whose parents or grandparents are admitted to residential care homes.

(d) introducing a personal disability allowance for eligible taxpayers, at a rate on par with the current disabled dependent allowance of $75,000. This will reduce tax revenue by about $450 million a year.

185. As for the proposed tax deduction for the premium of the Voluntary Health Insurance Scheme mentioned earlier, it will reduce tax revenue by around $800 million a year. Subject to the passage of the relevant legislative amendments by the LegCo, I hope that the measure will be implemented from the following year of assessment.

186. At present, if both husband and wife have income assessable to tax and wish to elect for personal assessment, they must jointly make an election. I propose to relax this requirement starting from the year of assessment 2018-19 by allowing the husband and wife the option to decide whether to elect for personal assessment, thereby providing greater flexibility to taxpayers. The relaxation will entail amendments to the Inland Revenue Ordinance.

Sharing Fruits of Success

Other Concessionary Measures

187. Having regard to our substantial fiscal surplus this year, I will introduce the following measures to share the fruits of our economic success with the community:

(a) reducing salaries tax and tax under personal assessment for 2017-18 by 75 per cent, subject to a ceiling of $30,000. The reduction will be reflected in the final tax payable for 2017-18. This will benefit 1.88 million taxpayers and reduce tax revenue by $22.6 billion;

(b) reducing profits tax for 2017-18 by 75 per cent, subject to a ceiling of $30,000. The reduction will be reflected in the final tax payable for 2017-18. This will benefit 142 000 taxpayers and reduce tax revenue by $2.9 billion;

(c) waiving rates for four quarters of 2018-19, subject to a ceiling of $2,500 per quarter for each rateable property. This proposal is estimated to benefit 3.25 million properties and reduce government revenue by $17.8 billion;

(d) providing an extra allowance to social security recipients, equal to two months of the standard rate Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, OALA or Disability Allowance. This will involve an additional expenditure of about $7 billion. Similar arrangements will apply to recipients of Low-income Working Family Allowance and Work Incentive Transport Subsidy, involving an additional expenditure of about $379 million. Moreover, I will invite the CCF to consider providing short-term relief for low-income households not living in public housing and not receiving CSSA (commonly known as the "N have-nots households");

(e) providing a one-off grant of $2,000 to each student in need to support learning, involving an expenditure of about $740 million; and

(f) paying the examination fees for candidates sitting for the 2019 Hong Kong Diploma of Secondary Education Examination, involving an expenditure of about $180 million.

Estimates for 2018-19

188. The major policy initiatives announced by the Chief Executive in her Policy Address involve an operating expenditure of $40 billion and capital expenditure of $23.5 billion. I will ensure that adequate resources are provided to fully support the launch of these initiatives.

189. Total government revenue for 2018-19 is estimated to be $604.5 billion, of which earnings and profits tax is estimated
at $218.4 billion. The revenue from land premium is estimated to be $121 billion, while that from stamp duties is estimated
to be $100 billion. The overall expenditure of the Government for 2018-19 is estimated to be $557.9 billion, an increase of 17.6 per cent compared with the revised estimate for 2017-18. Operating expenditure for 2018-19 is estimated to be $441.5 billion,
a year-on-year increase of 18.4 per cent or $68.6 billion. Recurrent expenditure, which accounts for over 90 per cent of operating expenditure, will reach $406.5 billion, a year-on-year increase of 11.8 per cent or $42.8 billion.

190. In 2018-19, the estimated recurrent expenditure on education, social welfare and healthcare accounts for about 60 per cent of government recurrent expenditure, exceeding $230 billion in total. Recurrent expenditure in these three areas recorded a cumulative increase of 42.8 per cent over the past five years.

191. The Government will increase manpower to support the implementation of various new policies and initiatives and ease the work pressure on civil servants. In 2018-19, the civil service establishment is expected to expand by 6 700 posts to 188 451. This represents a year-on-year increase of about 3.7 per cent, the highest since reunification.

192. Moreover, I will allocate a one-off provision to policy bureaux in 2018-19, equivalent to three per cent of the recurrent
non-personal emoluments portion of their envelopes, to allow greater operational flexibility in coping with price adjustments, implementing new initiatives of a smaller scale or making service improvement.

193. Taking all these into account, I forecast a surplus of $46.6 billion in the Consolidated Account in the coming year. Fiscal reserves are estimated to be $1,138.6 billion by the end of March 2019, equivalent to 40.3 per cent of GDP.

Medium Range Forecast

194. For the medium term, the average growth rate is forecast to be three per cent per annum in real terms from 2019 to 2022, slightly higher than the trend growth rate of 2.7 per cent over the past decade; and the underlying inflation rate is expected to average 2.5 per cent per annum. The medium-term economic forecast has taken into account the impact of an ageing population on economic growth, with the assumption that there are no severe external shocks during the period. That said, as the complicated and volatile political and economic environment around the world may cause fluctuations in the financial markets, and affect Hong Kong’s asset prices and economic sentiments, we must remain vigilant.

195. The Medium Range Forecast projects, mainly from a macro perspective, the Government's expenditure requirements from 2019-20 to 2022-23. It is noteworthy that annual expenditure on infrastructure projects will soon exceed $100 billion, but this projection has not fully reflected the expenditure that may be incurred by all the land development, highway and railway projects under planning. Besides, over the medium term from 2019-20 to 2022-23, growth of recurrent government expenditure is estimated to range between 6.1 per cent and 9.7 per cent per annum, consistently higher than the average annual nominal economic growth of five per cent over the same period.

196. Regarding revenue, the land premium estimate for 2018-19 mainly makes reference to the Land Sale Programme and the land supply target of the coming year. From 2019-20 onwards, the medium range forecast on land premium is based on the average proportion of land revenue to GDP over the past decade, which is 3.6 per cent of GDP. I also assume that the growth rate of revenue from profits tax and other taxes will be similar to the economic growth rate in the next few years.

197. Based on the above assumptions, I forecast an annual surplus in the Operating Account for the coming five financial years but a small deficit would surface in the Capital Account in 2021-22. Fiscal reserves are estimated at $1,222.6 billion by the end of March 2023, representing 35.6 per cent of GDP or equivalent to 21 months of government expenditure.

198. Taking all these into account, the Government will have an overall surplus in the next five years. The above forecast has not taken into account the tax rebate and relief measures that the Government may implement from 2019-20 to 2022-23.

Concluding Remarks

199. Mr President, in planning and preparing this Budget, I have been wrestling with what kind of a Budget would enable Hong Kong to forge ahead and make it a better place to live and work in. In formulating the initiatives in this Budget, I have taken into account the views received from different stakeholders and members of the public whom I consulted. The Budget is not a panacea for all our problems, but I am deeply grateful for the many people who devote themselves to the betterment of our home, Hong Kong. Their devotion has bolstered my confidence in the future.

200. Our country's economic development has entered a new phase. This, coupled with the ever-changing global economic landscape, has created a very favourable external environment for Hong Kong. If we can capitalise on the opportunities, the wind beneath our wings will bear Hong Kong far and high.

201. On the economic front, the current-term Government is ready to think out of the box and act proactively to open up new horizons for Hong Kong. To improve people’s livelihood, we are resolute in devoting resources and will spare no effort in solving problems.

202. Over the years, Hong Kong has weathered many storms, and always emerged stronger through changes. What remain unchanged are our commitment to diversity and openness, our pursuit of fairness and justice, and our aspiration for a happy life. I strongly believe that as long as we embrace hope, find the right direction and steel our resolve, we will be able to brave the wind and the billows to turn our dreams into reality.

203. Thank you, Mr President!

Ends/Wednesday, February 28, 2018
Issued at HKT 12:54

NNNN

Archives Yesterday's Press Releases

Back to Index Page

Today's Press Releases