2009/2010 Hong Kong Budget Highlights 

• 2.5% increase in real GDP in 2008.  A 2% to 3% decrease in GDP in real terms is forecast for 2009.  Medium term annual average growth rate over the period 2010 to 2013 is estimated to be 3.5% in real terms.
      
• Inflation rate for 2008 was 4.3%; and expected to be 1.6% in 2009.
     
• A revised consolidated budget deficit of $4.9 billion is forecast for 2008/09, as compared with the original $7.5 billion deficit forecast this time last year for the same period.  The $4.9 billion is made up of a $17.9 billion surplus on the operating account and a $22.8 billion deficit on the capital account.
     
• A consolidated budget deficit of $39.9 billion is forecast for 2009/10.  By 2013/14, a consolidated deficit of $1.3 billion is forecast, comprising a surplus of $13.6 billion on the operating account and a deficit of $14.9 billion on the capital account.  At the end of 2013/14, the Government is projecting it will have fiscal reserves of around $391 billion, approximately equivalent to 14 months of total Government expenditure.
     
• Operating expenditure for 2008/09 is forecast to be $260 billion.  Going forward, while total public expenditure will be kept below 20% of GDP, operating expenditure is projected to increase to $276.4 billion in 2013/14.

Profits Tax        

• The profits tax rates for companies and unincorporated businesses remain unchanged at 16.5% and 15% respectively.

Salaries Tax 

• No change in marginal tax rates and marginal tax bands.
     
• No change in the standard tax rate.  No change in personal allowances.

Government Duties

• Increase tobacco duty by 50%.

Other Tax Proposals

• Propose amendments to the Hong Kong tax legislation to accommodate the exchange of tax information requirements under avoidance of double taxation agreements.
      
• Propose changes to, or clarifications of, the arrangements for stamp duty, profits tax and property tax to create a level playing field between Islamic finance products and conventional ones.

One-off Measures proposed in the Budget

• Waiver of 50% of salaries tax and tax under personal assessment for 2008/09, subject to a ceiling of $6,000, deducted from the taxpayer's final tax payable for the year.
     
• Waiver of rates for the first two quarters of 2009/10, subject to a ceiling of $1,500 per quarter for each rateable tenement.
      
• Provide a 20% rental reduction for most Government properties and short-term tenancies of Government land for three months.
      
• An extension of the freeze on Government fees and charges related to people's livelihood to 31 March 2010.

Additional One-off Measures proposed on 26 May 2009

• Increase the one-off reduction of 50% of the 2008/09 final tax (capped at $6,000) in respect of salaries tax and tax under personal assessment originally proposed in the 2009/10 budget to 100%, subject to a revised ceiling of $8,000.
    
• Extend the waiver of rates to the last two quarters of 2009/10, subject to a ceiling of $1,500 per quarter for each rateable tenement.
    
• Waiver of the business registration fees for one year, the effective date of the waiver has yet to be announced.

Others      

• Various expenditure measures to preserve jobs and promote sustainable economic development including earmarking $400 million to enhance a series of employment programmes; $140 million to launch an "Internship Programme for University Graduates"; and $300 million over three years to support creative industries.
     
• Speed up the implementation of major infrastructural projects; the estimated capital works expenditure for 2009/10 will be $39.3 billion.
     
• Extend the exemption of electric vehicles from First Registration Tax for another five years.