'New tax measures can only provide moderate boost'
Economists have said new tax measures on high-income earners and luxury homes will only provide a moderate boost to government revenue. The comments come after Financial Secretary Paul Chan in his budget said that authorities are raising such taxes, and reintroducing a hotel accommodation tax. “The new taxation measures obviously will increase government revenue, but I guess it will not help much as we are talking about really a small, tiny percentage of the affected population,” said Heiwai Tang, an economics professor at the University of Hong Kong. “I guess there may be non financial, non economic reasons for why these taxes are raised. But if the Financial Secretary wants to use these taxes to fill the gap and hope that they will contribute to fiscal health, this is not going to be very effective,” he added. Meanwhile, Simon Lee, an honourary fellow at Chinese University’s Asia-Pacific Institute of Business, said he is surprised about the reintroduction of the hotel accommodation tax. “Now we try to encourage more visitors to stay overnight in Hong Kong. The hotel room rates in Hong Kong are very expensive compared with Shenzhen, so with the introduction of such hotel accommodation taxes, it could further discourage people from staying in Hong Kong,” said Lee. Looking ahead, both experts said they expect the geopolitical situation and a weaker-than-expected economic recovery on the mainland to weigh on the SAR’s fiscal health in the next financial year. “It all depends on how geopolitical trends are going to change, and we shouldn't be optimistic about that. With the US election coming up, the challenges and the risks are still obvious. We are just hoping that the Chinese economy will start recovering on a stronger foot,” said Tang. Lee, meanwhile, warned that the city is very likely to see another large deficit in the next fiscal year if the city’s bourse and property market perform similarly to last year. “For the 2024-25 fiscal year, the Financial Secretary expects the deficit to be around HK$50 billion, but that’s after taking into consideration the issuance of bonds of about HK$120 billion. And if we exclude the issuance of the bonds, then the deficit is over HK$100 billion, with reserves further to drop. So the outlook is not that optimistic,” Lee said. He added a lot hinges on how well the stock market will do in future. And Tang said he expects the SAR’s economy to see stronger economic growth from 2025 onwards, with potential interest rate cuts from the US possibly giving the property market here a boost.