Hong Kong has not gone far enough to create sources of income to plug its deficit, analysts have said, after Financial Secretary Paul Chan Mo-po shied away from broadening the tax base and forecast another year of government shortfalls and dwindling fiscal reserves.
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Delivering his annual budget on Wednesday, Chan said the deficit would be HK$87.23 billion (US$11.2 billion) for the current financial year and HK$67 billion for the following one. The city last recorded a budget surplus in 2018-19.
But he ruled out introducing any form of GST or sales tax, arguing they could undermine the city’s competitiveness.
Grant Thornton Hong Kong partner and head of tax William Chan Kam-wing said “bolder initiatives” and “an urgent study” on expanding the tax regime were needed, calling for the government to prioritise policies that would sustain economic momentum and public confidence in the city’s future.
Hong Kong was probably the only advanced economy in Asia without a goods and services tax, value-added tax or capital gains tax, he said.
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“I am puzzled why he is so determined not to review the tax regime at all, not to mention introducing any new tax items,” he said.