Though the issuance of bonds in recent times added to revenue, town nonetheless logged a deficit in each monetary 12 months since 2019-20, apart from 2021-22. The shortfall is anticipated to balloon to greater than HK$100 billion in 2023-24, excess of the preliminary estimate of HK$54 billion.
The fiscal reserves, which peaked at HK$1.17 trillion in 2018-19, are anticipated to shrink to an estimated HK$780 billion – about 12 months of expenditure – in 2023-24.
High accounting companies are much less optimistic, predicting a deficit of as a lot as HK$148 billion, leaving solely HK$686 billion within the reserves.
Affiliate Professor Billy Mak Sui-choi, of Baptist College’s accountancy, economics and finance division, stated it was time for the administration to cease handing out common sweeteners.
“The federal government typically provides out reduction packages, however not everybody wants it, particularly when our jobless fee is so low,” he stated. “A extra focused method must be taken to help essentially the most susceptible, and the good-to-have sweeteners must be reduce.”
Hong Kong ought to evaluate A&E charges to forestall abuse of healthcare system: John Lee
Hong Kong ought to evaluate A&E charges to forestall abuse of healthcare system: John Lee
He stated he thought an inexpensive enhance in public service costs was acceptable, so long as the inflation fee, price and affordability have been taken into consideration.
Finance sector lawmaker Ronick Chan Chun-ying advised extra management on welfare spending, for instance, by introducing means testing and stopping those that had left town completely from receiving subsidies.
The federal government must also crack down on misuse of the HK$2 transport fare subsidy and cease customers from doing quick journeys on longer routes as the federal government would then must reimburse transport operators greater than crucial, he added.
Through the years, the quantity reimbursed by the federal government to public transport operators underneath the scheme had elevated from about HK$1.2 billion in 2018-19 to just about HK$3.1 billion in 2022-23. The estimated price for 2023-24 is HK$6.7 billion.
Authorities spending on social welfare, training and healthcare altogether accounted for about 60 per cent of recurrent expenditure, respectively rising by 123 per cent, 53 per cent and 93 per cent over the previous 10 years.
The authorities have been most beneficiant within the 2020-21 monetary 12 months, spending HK$122 billion, with greater than half going to the HK$10,000 money handout for all eligible residents.
Simon Lee Siu-po, an honorary fellow at Chinese language College’s Asia-Pacific Institute of Enterprise, stated the present deficit was not solely the results of exterior influences but additionally poor fiscal self-discipline.
Urging the federal government to evaluate its monetary philosophy, he stated: “It’s irresponsible if the federal government asks the general public to pay extra, whereas not exercising efficient price management measures.”
Hong Kong deficit hits HK$164.1 billion for first 8 months of economic 12 months
Hong Kong deficit hits HK$164.1 billion for first 8 months of economic 12 months
For instance, he stated, the federal government ought to have recovered the price of public companies when the economic system was sturdy, as a substitute of elevating them when the economic system was sluggish.
He advised specializing in cost-cutting within the coming finances, together with a wage reduce for civil servants, saying “only a 10 per cent reduce might save tens of billions”.
In 2022-23, the federal government spent HK$149 billion on staff-related expenditure within the civil service and HK$150.5 billion on the subvented sector which incorporates colleges, public hospitals and NGOs.
Lee stated one other spherical of consumption vouchers would have a really restricted impact in stimulating the economic system, however it might be bearable to provide some sweeteners to town’s most underprivileged teams.
On the revenue aspect, income tax, salaries tax, land premium, stamp duties and funding revenue have been 5 main sources of income for the Hong Kong authorities.
Land premium and stamp duties accounted for greater than 30 per cent of whole revenue from 2014-15 to 2021-22, however their share shrank within the following years.
The federal government collected solely HK$69 billion every for each land premium and stamp duties final 12 months, a dip from HK$143 billion and HK$99 billion respectively in 2021-22.
Authorities estimated HK$85 billion in revenue every from each in 2023-24, however the inventory and property markets have remained sluggish over the previous 12 months, with six land tenders failing.
Professor Terence Chong Tai-leung, government director at Chinese language College’s Lau Chor Tak Institute of World Economics and Finance, stated the deficit was not an issue distinctive to town.
“As a monetary centre, our revenue from land gross sales and stamp duties will inevitably be affected by the high-interest fee setting,” he stated. “There’s no short-term answer to spice up revenue as a result of no single merchandise might help plug the tens of billions of shortfall.”
He advised that the federal government use a part of the Alternate Fund, the conflict chest used to defend Hong Kong’s forex, to purchase United States treasury bonds and help the coffers with the curiosity revenue as a countercyclical fiscal measure.
“For instance, allocating HK$2.5 trillion for the funding might already generate HK$100 billion of curiosity revenue, which might assist loads,” he stated. “Not like many international locations, Hong Kong has the posh of reserves, why don’t we make good use of them?”
Belts might must be tightened, Hong Kong’s finance chief warns
Belts might must be tightened, Hong Kong’s finance chief warns
Amid requires a tax base evaluate to extend revenue, Polly Wan Pui-yee, tax companion of Deloitte China, stated town ought to protect its easy tax regime and low tax charges to keep up its competitiveness.
“Simply imposing gross sales tax and VAT would already enhance the working price of companies, particularly the small and medium-sized enterprises, not to mention the extra tax,” she stated.
As a substitute, she advised attracting investments by providing tax advantages that stimulated extra financial exercise.
However lawmaker Chan stated that in the long term, the federal government wanted a brand new mindset in managing its funds, for instance, by being bolder in issuing bonds.
Suggesting utilizing a rolling finances to extend the accuracy of estimates, he stated: “Having a surplus doesn’t imply we’ve to provide out sweeteners, and having a deficit isn’t a purpose to decelerate funding in new industries and infrastructure.”
