The upcoming budget announcement carries significant weight, arriving amid global economic uncertainty and a projected HK$100 billion ($12.86 billion) deficit by the Hong Kong Special Administrative Region government. Beyond simply balancing the books, this budget presents a crucial opportunity to strategically invest in the city’s future, strengthening its resilience and ensuring sustainable growth. At the Hong Kong Institute of Certified Public Accountants (HKICPA), we believe this requires a multipronged approach, focusing on prudent fiscal management, targeted investments to sharpen Hong Kong’s competitive edge, and fostering a vibrant talent pool to strengthen the momentum of its economic growth.
While a substantial deficit is concerning, Hong Kong’s financial position remains relatively strong. However, complacency is not an option. The government should prioritize efficient spending, streamlining operations and leveraging automation. Crucially, public spending should yield maximum community benefit, stimulating economic growth and supporting those most in need.
Against this background, the institute has submitted its 2025-26 budget proposals which include a wide range of measures focusing on four key pillars — driving economic growth and stimulating investment, attracting and retaining talent, sustaining public finances, and sustainable development — to help Hong Kong start a new chapter and reinforce its position as one of the best places in the world to live, work and visit.
The HKICPA estimates that the fiscal deficit for 2024-25 will be approximately HK$97 billion, because of lower land sales and slower-than-expected economic growth. The fiscal reserves will drop to HK$637 billion at the end of March 2025, equivalent to around 10 months of government expenditure. However, given Hong Kong’s overall financial strength, the institute believes that the financial position remains sound and relatively stable for now. However, this is just a snapshot and, given the external uncertainties, the government must exercise prudent oversight of public finances, look at spending priorities and continue to explore new revenue sources.
The HKICPA continues to call for a more extensive review of Hong Kong’s tax system with the aim of enhancing tax certainty and competitiveness, as well as exploring options to provide sufficient, stable revenues for the city’s future development.
Regarding the exploration of new taxes, since it may take several years to conduct detailed research and consultations to achieve a public consensus, the government should begin planning as early as possible.
The government should also consider possible public-private partnership (PPP) models for funding infrastructure projects, bearing in mind that the scale of such projects is increasing. Hong Kong already has experience of carrying out successful PPP projects. In-depth consideration should be given to determine the most appropriate funding options for various infrastructure projects.
The HKICPA hopes that the upcoming government budget will lay a solid foundation for a glittering future for Hong Kong. The whole community will benefit from Hong Kong’s enhanced resilience, sustainable public finances and continuing economic growth and development
In view of the increasing volume of cross-border travel, which in turn increases the demand for facilities and staffing resources, the institute recommends that the government consider imposing an infrastructure toll on all private and public ground transportation entering specified Hong Kong control point locations. The revenue generated should be used to help toward the costs of infrastructure development. Additionally, it is suggested that the government increase the higher-tier standard rate of salaries tax from 16 percent to 16.5 percent and increase the stamp duty on leases of residential properties, to raise more government revenue.
Talent is a crucial driver of economic growth. Faced with intense global competition and an aging population, actions should be taken to close the skills and resources gap. This means not only attracting top talent but also nurturing our local workforce.
Doubling personal allowances under salaries tax for new parents and skilled retirees (aged 65 and above), for two years, could incentivize both childbirth and the retention of valuable experience. Simultaneously, the government should encourage employers to adopt more flexible and family-friendly policies and measures. Strengthening the competence and skill sets of the local labor force through enhanced education and training to meet current demands, especially for new and emerging industries, is also essential.
We appreciate the government’s strenuous efforts in attracting talent from overseas and the Chinese mainland in recent years. To further support talent attraction and retention, the HKICPA suggests providing time-limited subsidies or tax incentives for specific industries, simplifying the visa application process, establishing a green channel for the Guangdong-Hong Kong-Macao Greater Bay Area and foreign students to come to Hong Kong for internships during peak work seasons, and providing allowances for the private education of children of overseas talent, to encourage them to raise their families here.
The institute also recommends that the government further supports the development of innovation and technology by partially subsidizing the costs incurred by companies that wish to invite international experts to provide training for their Hong Kong research and development staff. This investment in skills development will further boost Hong Kong’s competitive edge.
Finally, sustainability cannot be an afterthought. Against the backdrop of the growing importance of green finance and sustainability, the HKICPA applauds the government’s ongoing efforts to achieve carbon neutrality by 2050, and to strengthen Hong Kong’s position as a leading green finance hub. Following the government’s publication of the Roadmap on Sustainability Disclosure in Hong Kong, and the issuance by the HKICPA of the Hong Kong Financial Reporting Standards Sustainability Disclosure Standards (HKFRS SDS), we recommend that the government encourages large “publicly accountable entities”, which are more likely to target investment, to opt for early adoption of the HKFRS SDS on a voluntary basis by, for example, offering enhanced tax deductions on relevant qualifying expenditures. This will help facilitate the development of a comprehensive sustainability disclosure ecosystem in Hong Kong.
The HKICPA hopes that the upcoming government budget will lay a solid foundation for a glittering future for Hong Kong. The whole community will benefit from Hong Kong’s enhanced resilience, sustainable public finances and continuing economic growth and development.
The author is president of the Hong Kong Institute of Certified Public Accountants.
The views do not necessarily reflect those of China Daily.
