Hong Kong's top financial officials have put forward some amendments aimed at bringing back wealth to people, including tax cuts and other compromises. The package of measures and compromises are offered to help the disadvantaged, improve Hong Kong's economical stability and guarantee lasting development.



The government has predicted a surplus in the Consolidated Account of 115.6 billion Hong Kong dollars ($14.8 billion) and a surplus of 63.7 billion HKD (about $8.19 billion) in the Operating Account for 2007-08.

To retrieve wealth to the people, the government has recommended a one-off tax reduction of 75 percent of salaries tax and tax under personal assessment for the 2007-08 fiscal year up to a highest of 25,000 HKD ($3,213). Almost one million taxpayers would not have to spend more than 5,000 Hong Kong dollars in tax once the reduction is a reality. The decision would end in an expense of 12.4 billion Hong Kong dollars ($1.59 billion) for the government in 2008-09 and will be a blessing for 1.4 million taxpayers.

The proposal also includes increasing the basic allowance and single parent allowance from 100,000 HK dollars to 108,000, and boosting the married person's allowance from 200,000 HK dollars to 216,000. Once the proposals are implemented, all the major allowances and tax rates will go back to their 2002-03 levels.

The salaries tax and personal assessment tax standard rate will be deduced by one percentage point to 15 percent, from the next fiscal year, and there will be a reduction of profits tax to 16.5 percent. Improving the tax bands from 35,000 HKD to 40,000 HKD is also a potential reality.

Small and medium businesses are also set to benefit from a one-off tax reduction with a proposed 75 percent concession of profits tax for 2007-08 up to a maximum of 25,000 HK dollars. Business registration fees will also be boosted for 2008-09. For the environmental front, a reduction of 30 percent, 50 percent or 100 percent in the first registration tax of commercial vehicles pertaining to Euro V emission standards, and a 100 percent profit tax reduction for capital expenditure on environmentally-friendly machinery and equipment in the first year of purchase is also among the potential changes.

To enhance Hong Kong as a trade and distribution center for quality wine in Asia, duties on wine, beer and all other alcoholic beverages barring spirits will be freed. The HK government has been pushed to decrease corporate profits tax further in accordance with the global trend and increase the stamp duty fee ceiling for properties. The corporate profits tax and standard rate of salaries tax have been reduced by 1 percent to 16.5 percent and 15 percent respectively. There was an increase in the stamp duty ceiling to properties priced at more than HK$3 million from HK$2 million according to the property price index to support young and middle-income families withstand property inflation.

There was also an advice to allowing regional headquarters full profits tax exemption for management and consultancy income attained by the Hong Kong entity from associated overseas entities. As only Hong Kong-based income is taxable according to the local system, legislation need to improve reliability and consistency in the tax system, and address issues like whether profits or salaries have a Hong Kong or an overseas source.

Reliability is of prime importance for investors. There was also a suggestion to the government to impose "polluter pays taxes" including electronic road pricing, fuel duties, air and water pollutant taxes, and other resource consumption taxes. This came after the understanding that pollution is the biggest threat to economic growth in HK.