The Financial Secretary Mr John Tsang has put forward a Budget that comprehensively leaves wealth with the people, just as the SAR Government is enjoying a considerable financial surplus. The Federation of Hong Kong Industries (FHKI) welcomes the Budget and believes that the series of tax concessions can lessen the burden on all sectors of the society and relieve the pressure of inflation. However, the FHKI also calls on the Government to rectify the fact the Budget does not provide any concrete support for the local industry’s sustainable development.
Clement Chen, chairman of FHKI, supports the SAR Government for returning part of its surplus to the citizens in accordance with the principles of prudence and balance of receipt. All citizens can now share the benefits of economic growth, and help relieve the inflationary pressure, and thus harmony in the community will be enhanced. Mr Chen said, “This is a rather well-planned Budget. Most relief measures are one-off and within a given time frame, thus preventing any immense financial burden for the Government in future.”
The Budget also confirms the Government’s commitment to improving the environment. The FHKI welcomes in particular the 100% profits tax rebate for enterprises’ capital expenditure on environmentally friendly equipment in the first year. Mr Chen noted that the FHKI had earlier suggested tax concessions on environmental expenditure to the Government. He was glad that the suggestion had been adopted and believed tax concessions are effective incentives for enterprises to invest and update their equipment to better protect the environment.
The FHKI also agrees with the suggestion of cutting profits tax by one percentage point. Mr Chen commented that Singapore, Hong Kong’s major competitor, had lowered profits tax several times in recent years. The city state’s tax rate was just slightly above Hong Kong’s. The SAR Government’s move to lower profits tax rate could strengthen Hong Kong’s attractiveness to foreign enterprises, fuel economic growth and benefit the job market.
Nevertheless, the FHKI believes that the Budget should address more concrete measures to support the long-term development of Hong Kong industry. This would also tie in with the Government’s hope of turning Hong Kong into a knowledge-based economy. Mr Chen said: “Design and R&D are the two most valuable segments in our supply chain, and are suitable for further development under the local environment. However, Hong Kong is far behind other major neighbouring competitors, in terms of investment in innovation and R&D. This would be unfavourable for Hong Kong to attract talents as well as the development of value-added industries.” With an abundant surplus, the FHKI is disappointed that the Budget does not provide any tax allowances on R&D.
Mr Chen noted that the Government should be capable of offering more tax allowances in recent years to encourage investment towards innovation and R&D by Hong Kong industry. He hoped that the Government would look into tax incentives that could boost innovation and R&D, and to incorporate such measures into next year’s Budget.
In addition, Hong Kong manufacturers operating in the PRD are now facing severe challenges with adjustments in Mainland’s processing trade policy, industry upgrade and relocation, and rising production costs. Mr Chen pointed out that the manufacturing base of Hong Kong enterprises in the PRD is the pillar of Hong Kong’s economic development, and we have to sustain the growth of this manufacturing base to ensure the long-term development of our economy.
He said: “In FHKI’s submission to the Chief Executive earlier, we proposed that that the Government should provide support for Hong Kong enterprises in building brands, engaging in innovation and R&D, enhancing environmental performance, establishing product safety standards and opening up the Mainland market. We hoped that the Government would take into account our proposals and formulate measures that would support Hong Kong industry.”
