Financial Secretary Paul Chan Mo-po announced in his budget speech that the government will earmark HK$18.3 billion (US$2.35 billion) to support businesses that have been hit by the economic downturn following months of social unrest and the US-China trade war, as well as further potential damage from the coronavirus outbreak.
He has been under intense pressure from lawmakers to dip into the government’s large fiscal reserves of about HK$1.1 trillion to help the city ride out the economic slump. “Since January 2020, Hong Kong has come under the threat posed by the novel coronavirus outbreak, which further dealt a blow to the economy. We must take decisive measures to tackle the situation,” Chan said.
Presenting the budget proposals for the financial year that starts in April, Chan said Hong Kong permanent residents aged 18 and above will each to receive a cash handout of HK$10,000 (US$1,200) in a HK$120 billion (US$15 billion) relief deal rolled out by the government to ease the burden on individuals and companies, while saving jobs.
Chan outlined five new measures to support business enterprises:
- Concessionary low-interest loan scheme with 100% government guarantee up to a total of HK$20 billion. The maximum loan will be HK$2 million, with a repayment period up to three years and a moratorium on principal repayment for the first six months. The scheme will be open for application for six months.
- 100% reduction in profits tax for the 2019-20 assessment year, subject to a ceiling of HK$20,000. This reduction will be reflected in the final tax payable for the year of assessment 2019/20.
- Waiving rates for non-domestic properties for 2020-21, subject to a ceiling of HK$5,000 per quarter in first two quarters and HK$1,500 per quarter for the remaining two quarters.
- Waiving business registration fees for 2020-21, a measure expected to benefit 1.5 million business operators.
- Waiving registration fees for company annual returns for two years, a measure expected to benefit 1.4 million companies.
The government also continues to implement relief measures announced last year – subsidising 75% of electricity charges for four extra months, subject to a monthly cap of HK$5,000, for non-residential accounts and waiving 75% of water and sewage charges of non-domestic households for four extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively.
“I hope that [the measures] will not only help support our enterprises but also safeguard jobs for more than three million workers,” Chan said in his budget speech, urging all employers and employees to “stand together to ride out the difficult times”.
The government had earlier announced a HK$30 billion Anti-epidemic Fund to implement 24 measures to further enhance the administration’s capability in combating the COVID-19 epidemic and provide assistance to enterprises and members of the public.
Chan forecast a deficit for the next five years, with an estimated HK$139.1 billion for 2020-21, equivalent to be around 4.8% of GDP. In 2004, Hong Kong saw a HK$63.3 billion deficit in the wake of SARS and an economic downturn.
“Any measures to assist local businesses are welcome. It is unclear whether these amounts will be enough to save the many businesses which are suffering massively under the perfect storm of the historically high rents, the demonstrations and now coronavirus,” said Sovereign Group chairman Howard Bilton.
“However, it seems that nothing is going to be done to ease the housing crisis and make housing affordable for the poorer elements of society. The government has announced a series of land sales with a projected price that will make the housing completely unaffordable for the one million people who, according to the government’s own statistics, are living below the poverty line in Hong Kong. Nor for a whole lot more people who are considerably richer than that.
“The previous Financial Secretary John Tsang set up a fund of HK$27 billion to pay for a 10-year development programme for public housing. This had grown to HK$82.4 billion by the beginning of 2019 but the whole amount was then transferred to the city’s fiscal reserve. This appears to have marked the end of any pretence that the government would do anything about the appalling housing situation. Is it any wonder that we should have social unrest in this great city when we have such disparity of wealth that even middle-class families cannot afford a home?”