2006/2007 Hong Kong Budget Highlights 

Highlights on   Economic Indicators     Profits Tax Salaries Tax

Government Duties and Charges Others

Economic Indicators        

• 7.3% increase in real GDP in 2005/2006.  A 4% to 5% increase in GDP in real terms is forecast for 2006/2007.  Medium term growth forecast over the period 2007 to 2010 is estimated to be 4% in real terms.
   
• Inflation for 2005/2006 and 2006/2007 of 1.1% and 2.3%, respectively.
   
• The Government has achieved its three fiscal targets in 2005/2006, three years ahead of schedule: operating expenditure has reduced to less than $200 billion in both 2004/2005 and 2005/2006; fiscal balance has been restored in the operating and consolidated accounts in 2005/2006; and public expenditure has been less than 20% of GDP from 2004/2005.
   
• A consolidated budget surplus of $4.1 billion is forecast for 2005/2006, as compared with a deficit of $10.5 billion announced this time last year for the same period.  The $4.1 billion is made up of a $5.8 billion surplus on operating account and a deficit of $1.7 billion on capital account.
   
• A consolidated budget surplus of $5.6 billion is forecast for 2006/2007, as compared with a deficit of $1.2 billion for the same period in last year's medium range forecast.  By 2010/2011, a consolidated surplus of $32.6 billion is forecast, comprising surpluses of $22.9 billion and $9.7 billion on operating and capital accounts respectively.  At the end of 2010/2011, the Government has projected fiscal reserves of around $392 billion, equivalent to some 17 months of total Government expenditure.
   
• Operating expenditure for 2005/2006 is forecast to be $194.7 billion.  Going forward, whilst total public expenditure will be kept at or below 20% of GDP, operating expenditure will increase to $230.7 billion in 2010/2011.

Profits Tax        

• No change in corporate Profits Tax rate.  Rates remain at 17.5% for companies and 16% for unincorporated businesses.
   
• Group relief and relief for carry back of losses ruled out.

• No changes in tax allowances, or the 2% rate applicable to the first $30,000 of assessable income, but from 2006/2007 the second, third and top marginal tax rates will be reduced by 1% each to 7%, 13% and 19%, respectively.  The standard rate of tax remains at 16%.
   
• Basic and married person's allowances will remain $100,000 and $200,000 respectively in 2006/2007.
   
• Extension of salaries tax relief for home loan mortgage interest of up to $100,000 per annum by a further 3 years, to 10 years.

• No changes in duties on alcoholic liquor, tobacco duties, fuel duties, betting duties, or hotel accommodation tax.
   
• No changes in Stamp Duty rates.
   
• No changes in Rates.
   
• Reduction of 20% in levy on trading in securities, futures and options contracts.
   
• Promotion of environmental protection, through "green" taxes in accordance with the Polluter Pays principle and introduction of product responsibility schemes to promote recovery and recycling of tyres and to reduce use of plastic bags.

Others      

• A nine month consultation process on the possible implementation of a Goods and Services Tax to commence in the middle of the year.
   
• Introduction of tax deductions for private medical insurance to be considered as part of a broader review on the financing of public health care services.
   
• Measures to strengthen Hong Kong's financial services industry and its status as an international financial centre, including expanding Renminbi business and upgrading market quality.