Hong Kong chief executive Carrie Lam says city’s next budget could be ‘full of surprises’

Hong Kong’s next budget could be “full of surprises” amid the city’s bright economic outlook, with economic growth setting to surpass 3.7 per cent for 2017, the city’s leader has revealed.

Carrie Lam Cheng Yuet-ngor also promised to create a “favourable business environment” for local enterprises, citing the introduction of the two-tier tax system and the tax incentives for companies investing in innovation and technology.

The chief executive was addressing guests at the inauguration ceremony of the Chinese Manufacturers’ Association of Hong Kong, held on Thursday at the Hong Kong Convention and Exhibition Centre in Wan Chai.

Seeing a rosy picture for Hong Kong, Lam said: “Hong Kong’s overall economic performance has been satisfactory. The GDP is anticipated to go up by no less than 3.7 per cent in real terms for the entire [2017].

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“As to how high the growth is, I would leave it to be announced in the coming budget that could possibly be full of surprises.”

She did not elaborate but already received a warm applause from the audience.

Her government’s maiden budget is to be delivered by Financial Secretary Paul Chan Mo-po on February 28.

Lam noted there would be a two-tier profits tax system to enhance Hong Kong’s competitiveness.

Under the plan, the tax rate for the first HK$2 million of profits of enterprises will be lowered to 8.25 per cent, or half of the prevailing standard profits tax rate. Profits of over HK$2 million will continue to be subject to the standard tax rate of 16.5 per cent.

To encourage enterprises to invest in research and development, Lam has proposed the first HK$2 million eligible research and development expenditure will enjoy a 300 per cent tax deduction with the remainder at 200 per cent.

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Amid a huge surplus, mainly due to an unexpected increase in revenues from land sale and stamp duty from a booming property market, the government has been urged to offer more “sweeteners”, including tax breaks, and welfare allowances.

The Hong Kong Institute of Certified Public Accountants has predicted a fiscal surplus of about HK$180 billion for 2017-18.

At a public forum last month, Chan, when asked if he would hand out cash to people, as the government did in 2011, replied: “Let me think about it.”

It has since become the top item on Hongkongers’ wish list.

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Earlier this week, Lam also hinted her government would undertake more “daring” spending, to fulfil her “new fiscal philosophy”.

Chan, who was also among the about 1,000 guests at the association’s inauguration ceremony, did not respond to reporters’ questions upon leaving. Nor did Lam.

Meanwhile, in his address, the new association president Dennis Ng urged members to grab the opportunities offered by the country’s developments, citing the Belt and Road Initiative for opening up international trade, and the Greater Bay Area development that integrates nine cities in Guangdong province as well as Hong Kong and Macau into a regional business hub.

Ng said the two strategies “are presenting another wave of historical opportunities to Hong Kong” following the open door policy in 1978.