Hong Kong is eagerly anticipating the upcoming Budget Address from Financial Secretary Paul Chan. Despite the projected deficit of just under HK$100 billion for the 2024-25 financial year – marking three years of fiscal challenges – this moment presents an opportunity for innovative thinking and bold policies. 

After thorough consultations with its members, the Chamber has submitted a comprehensive set of proposals to revive the economy and address critical issues to bolster Hong Kong’s standing as a premier business destination.

One of the key recommendations focuses on containing expenditure while simultaneously exploring new revenue streams. The Chamber advocates for increased issuance of government-backed bonds. Despite the decline in fiscal reserves, Hong Kong’s low debt-to-GDP ratio presents a unique opportunity. Creating a vibrant bond market will boost liquidity and support long-term investments, steering clear of financing recurrent expenditures.

Taxation is another area of focus. The Chamber’s proposals include introducing a tax on digital activities conducted by non-Hong Kong resident suppliers. Currently, these firms operate without tax obligations in Hong Kong, putting local businesses at a disadvantage. By implementing this tax, the authorities can generate additional revenue while fostering a fairer competitive landscape for local digital service providers.

For many SMEs, the post-pandemic environment is challenging due to shifts in consumption patterns, a sluggish property market and ongoing geopolitical risks. Access to stable and affordable financing is crucial for their survival. The Chamber proposes that the Government provide long-term fixed-rate mortgage loans to SMEs. 

This initiative would involve the Hong Kong Mortgage Corporation purchasing and guaranteeing mortgages from financial institutions, thereby increasing affordable lending options. The model mirrors the role of the US Federal National Mortgage Association and would help stabilize SME financing, making it more predictable and affordable, ultimately supporting their growth and resilience.

Our proposals extend to social welfare as well. We recommend revising the Public Transport Fare Concession Scheme by offering the existing HK$2 fare capped at HK$1,500 annually for elderly persons aged 60-64. This adjustment would better address the needs of the elderly while managing public expenditure.

Additionally, targeted incentives are required to rejuvenate the headquarters economy and attract foreign direct investment. The number of regional headquarters in Hong Kong has not rebounded to pre-pandemic levels. Offering three-year tax holidays for returning RHQs and preferential tax rates will entice foreign companies to list in Hong Kong.

With Hong Kong navigating a pivotal moment in its growth, the Chamber has made every effort to present a comprehensive and thoughtful roadmap for economic revitalization. By championing fiscal responsibility and enhancing our city’s global competitiveness, we can withstand economic challenges and emerge stronger and more resilient than ever.  

Patrick Yeung
ceo@chamber.org.hk