PwC launches strategic recommendations for the 2026/27 Hong Kong Budget: Driving growth frontiers to unlock opportunities
The firm forecasts a consolidated budget deficit of HK$0.2 billion for the 2025/26 fiscal year, diverging significantly from the Government’s initial forecast of a HK$67 billion deficit.
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Hong Kong, 19 January 2026—PwC Hong Kong has put forward a series of strategic recommendations for the Government’s upcoming budget, aiming to drive growth and unlock new opportunities. Hong Kong should continually adapt to global economic trends—PwC’s recommendations are aimed at addressing these challenges and opportunities.
Hong Kong’s economic performance in 2025 revealed a blend of promising growth and persistent challenges. Real GDP growth reached 3.3% over the first three quarters—an improvement on the 2.6% for the same period in 2024.
Sluggish property transactions throughout 2025 have impacted revenues from land sales. Based on PwC’s latest estimates, revenue from land sales will be approximately HK$13 billion, which is 38% lower than the Government’s original estimate of HK$21 billion. Revenues from profits tax and salaries tax will stand at HK$282 billion—down 5% from the original projection of HK$297 billion. However, stamp duty is expected to generate HK$100 billion—around 48% higher than the budget estimate of HK$67.6 billion—driven by the bullish stock market.
As a result, the Government is expected to record an operating surplus. Although higher capital works expenditure and lower land sales are estimated to result in a capital account deficit, the operating surplus helps cushion the overall impact, leaving only a projected consolidated deficit of HK$0.2 billion in 2025/26.
PwC estimates that, as of 31 March 2026, the fiscal reserves will be HK$654.1 billion, equivalent to approximately ten months of Government expenditure. This marks the lowest level of fiscal reserves registered by the Government (equalling 2024/25)—the highest level being 28 months of expenditure.
Jeremy Ngai, PwC China South Tax Leader, said: “The Government originally forecast a consolidated deficit of HK$67 billion for 2025/26. PwC’s anticipation of a much smaller consolidated deficit of HK$0.2 billion, close to breakeven, demonstrates the Government’s commitment to securing Hong Kong’s economic future. By positioning Hong Kong as a global gateway, particularly to support Chinese Mainland enterprises’ outbound strategies, and by pritorising talent and investment attraction, the Government is unlocking opportunities and paving the way for a prosperous future.”
Advancing Hong Kong’s growth frontier
Rex Ho, PwC Asia Pacific Financial Services Tax Leader, said: “Hong Kong’s position as a leading hub for capital markets and asset management is vital for our economic future. Stamp duty exemption for market intermediaries and tax neutrality on securitisation programmes will promote growth and position Hong Kong as a leading centre for securitisation. Promoting the internationalisation of RMB through tax incentives for RMB-denominated products will diversify financial offerings, while tax concessions for gold traders and investors in gold investment products will solidify Hong Kong’s role as a gold trading centre. In addition, fostering collaboration between HKEx and Middle Eastern exchanges will position Hong Kong as a leading trading platform for Islamic financial products, opening new opportunities for the city’s financial sector.”
Kenneth Wong, PwC Hong Kong Tax Controversy Services Leader, said “PwC recommends enhancing the existing R&D tax incentives to drive technological advances, particularly in respect of payments for outsourced R&D activities undertaken in the Greater Bay Area. A 150% enhanced tax deduction for enterprises investing in AI technologies can be transformative, encouraging innovation and digital transformation. Our vision extends to strengthening Hong Kong as an international trade centre, where targeted tax incentives for global traders, including e-commerce and gaming sectors, can reinforce our competitive advantage.”
Agnes Wong, PwC China South Private Clients and Family Office Tax Leader, said: “To solidify Hong Kong’s status as a leading international shipping centre, the Government should pair its stepped-up promotion of tax concessions with swift implementation of the enhanced maritime tax concessions, thereby strengthening competitiveness against jurisdictions such as Singapore, while also expediting the introduction of the proposed half-rate tax concessions for commodity trading we have long championed.”
Hong Kong as a global gateway
Kenneth Wong said: “To bolster Hong Kong’s global status, we propose a half-rate tax concession for regional headquarters that engage in specific activities while maintaining adequate economic substance. Expanding Hong Kong’s tax treaty network and strengthening international collaboration with key jurisdictions across ASEAN, Latin America, and Belt and Road regions is essential. Leveraging Hong Kong’s role as a super-connector bridging the Chinese Mainland and global markets will unlock new opportunities and reinforce its position as a competitive international business centre.”
Attracting and nurturing talent
Agnes Wong said: “The Government’s initiatives are centred on transforming Hong Kong into a prime destination for family offices and high-net-worth individuals. To strengthen its appeal to global talent and investors, the New Capital Investment Entrant Scheme should raise the cap on residential property counted toward the investment threshold from HK$10 million to HK$15 million, aligning it with non-residential property. Accelerating Hong Kong residency status for principals of eligible family offices and their families, alongside streamlined visa applications and non-tax incentives, such as child education allowances and cash bonuses, will further support the Government’s goal of attracting and retaining both family office principals and professionals.”
Building a caring, inclusive society
Agnes Wong said: “Support for working families includes subsidies for daycare services and tax deductions for hiring domestic helpers and caretakers. Extending tax deductions for elderly residential care to include costs incurred in the Chinese Mainland acknowledges the cross-boundary caregiving responsibilities faced by many families. Offering a 100% tax reduction for profits tax, salaries tax, and tax under personal assessment—subject to a cap—demonstrates our commitment to alleviating financial pressures.”
Public finance and AI-enabled efficiency in public services
Jackie Yan, PwC China Economist, said: “With the operating account expected to return to surplus but structural pressures persisting, Hong Kong should maintain strict discipline over recurring expenditure and remain fully committed to the Reinforced Fiscal Consolidation Programme. To address a near term capital account deficit, prudent use of Hong Kong’s low government debt level to issue diversified bonds can fund major capital projects, with bond issuance serving not only to bridge the financing gap but also as a strategic lever to support long term growth and fiscal resilience. At the same time, the Budget should prioritise innovation led growth by accelerating the Northern Metropolis as a hub for AI, life sciences, the low-altitude economy and advanced manufacturing, and by promoting wider adoption of AI-enabled efficiency across public services that catalyses the city’s vibrant AI ecosystem, while delivering efficiency gains and cost savings.”
