On February 26th, 2020, the Hong Kong government revealed its 2020-21 budget, promising economic aid measures worth HK $ 120 billion to revive and support the city's economy, shaken both by civil unrest and the COVID-19 epidemic.
The government has planned important measures to support the city's economy by promising cash allowances for every adult permanent resident of Hong Kong. This is accompanied by generous tax breaks and business support and initiatives to resolutely fight the epidemic, with an expected impact on the tax deficit of around HK $ 139.1 billion, equivalent to 4.8% of GDP. The government’s official GDP forecast is an expected GDP growth between 0.5% and 1.5% during 2020.
Financial support and industry concessions
The Hong Kong government has introduced a low interest subsidized loan under the SME Loan Guarantee Scheme, under which the government will provide a 100% guarantee to SME’s availing of the scheme. The maximum loan amount for the eligible businesses is based upon salary and rental costs for six months, with a maximum limit of HK $2 million. The Hong Kong government expect to provide HK $20 billion in guarantees under this SME loan scheme.
Taxation on profits for the 2019/20-year assessment shall be reduced by 100%, with a limit of HK $20,000 (which is expected to be availed of by around 140,000 taxpayers). The registration fees for companies for 2020-21 with the company registry shall be voided (1.5 million potential beneficiaries among commercial operators) as well as the registration fees for the business registry for two years.
Rental costs shall be reduced by 50 percent for another six months for state-owned properties with eligible tenants, public land and EcoParks. This is in addition to a waiver of 75 percent of water and sewage costs and a subsidy of 75 percent of electricity utility bills for each eligible non-domestic household account.
Public welfare measures
The government proposed a one-off special allowance payable by the Anti-Epidemic Fund for approximately 200,000 low-income families and proposed that a cash payment of HK $ 10,000 be paid to each adult permanent resident of Hong Kong.
The government has proposed to reduce personal and wage taxes by 100% in 2019/20, with a limit of HK $ 20,000 for the benefit of 1.95 million taxpayers and to waive residential property rates for the four quarters of 2020 -21, with a limit of HK $ 1,500 per quarter for each taxable property, (HK $ 5,000 per quarter in the first two quarters and HK $ 1,500 per quarter for the remaining two quarters, for each non-domestic taxable property).
All eligible social security beneficiaries are to be granted additional benefits equal to the standard payment of one month of full social security assistance for old-age allowance or disability.
For low-income tenants living in public rental units of the Hong Kong Housing Authority and the Hong Kong Housing Society the authorities will provide an allowance of one month’s rent. The Hong Kong Mortgage Corporation will launch a pilot program which offers fixed rate mortgage loans through banks to provide home buyers with more options and reduce the risk of interest rate volatility.
Health care support
A commitment to ensure a recurring funding of HK $75 billion to the hospital authority over the 2020-2021 period was given, which represents a 35% increase over the 2017-18 payment of HK $55.6 billion.
The government has announced an intention to adopt an expansive fiscal position to implement counter-cyclical measures, in support of several sectors most affected by the Covid-19 epidemic, by introducing cash subsidies to different sectors. The Hong Kong government in particular:
promised HK $700 million to promote tourism in the city following the coronavirus epidemic and promised another HK $6.5 billion for port development initiatives.
On the innovation front, there will be an allocation of HK $3 billion for a possible phase 2 of the Science Park expansion program, as well as a possible third InnoHK research cluster in the park. Aside from that, he also promised HK $2 billion for a reindustrialization.
Regarding the retail sector, it placed around HK $5 billion in subsidies on each eligible reseller (which sells goods in a physical location primarily to the public for personal / domestic consumption).
In the food sector, it promised about HK $4 billion to support general catering, factory canteens, food factories, bakeries and fresh produce stores.