One of the largest chambers of commerce in Hong Kong said on Tuesday that it has suggested the special administrative region government tax nonlocal digital services providers 3 to 5 percent, with the aim of bolstering government revenue as it grapples with a fiscal deficit challenge.

The proposal was made by the Hong Kong General Chamber of Commerce (HKGCC), which represents more than 4,000 corporate members, ahead of the release of the city’s 2025-26 Budget on Feb 26.

The chamber said such a measure could enhance fiscal revenue without increasing the financial burden on residents, while providing “a level playing field” for local enterprises that have contributed to the city’s economy.

READ MORE: HKGCC opposes new taxes on local businesses, taxpayers

Wayne Lau, chairman of HKGCC’s taxation committee, said nonlocal digital service suppliers earned about $3.5 billion in Hong Kong last year, and a 5 percent tax on them could yield nearly HK$1.4 billion ($180 million) in revenue.

Lau said that taxing overseas digital services is a practice that has been increasingly adopted worldwide since 2015, with more than 100 countries, such as the United Kingdom, New Zealand, and Canada, implementing similar measures.

According to HKGCC’s suggestion, the tax could be imposed on certain activities from next year, such as in-app purchases, game downloads, and advertisements.  

As countries and regions continue their digital transformation, there will be more businesses in this sector, he added, indicating that the proposed tax could increase fiscal revenues for Hong Kong in future years.

The chamber has also urged the SAR government to consolidate civil service roles, in a bid to reduce redundancies and save costs.

For the 2023-24 fiscal year, the government spent more than HK$156 billion on civil servant salaries and other staff-related items, accounting for almost 26 percent of its total operating expenditure.

Amid increasing talk about whether to reduce civil servant salaries, HKGCC Chairwoman Agnes Chan Sui-kuen said she objects to such a measure as it could lead private employers to follow suit and lower employee wages, which would be detrimental to economic recovery.

The chamber also suggested implementing a cap on the “HK$2 Scheme”, which enables Hong Kong residents aged 60 and above to travel on public transport modes and services at a concessionary fare of HK$2 per trip.

In the 2023-24 fiscal year, the government spent about HK$4 billion on the program, up more than 200 percent on the HK$1.3 billion it spent in 2019-20.

Under HKGCC’s proposal, residents aged 60 to 64 would enjoy the concessionary fare for up to 750 trips per year, while maintaining existing benefits for those aged 65 and above.

READ MORE: Central govt and businesses have confidence in HK's future

Earlier last month, Financial Secretary Paul Chan Mo-po projected that the deficit for the 2024-25 fiscal year would be less than HK$100 billion. The deficit in each of the past two years was more than HK$100 billion.

Agnes Chan said that government money in the past three years was mainly used to support consumption and employment affected by the COVID-19 pandemic and post-pandemic recovery.

But with the economy continuing to recover, she said there is no need for excessive concern over the deficit. “I’m confident in the financial secretary’s target of achieving fiscal balance within three years,” Agnes Chan added.

Contact the writer at irisli@chinadailyhk.com