Forecasts and recommendations from PwC Hong Kong
Leading up to the 2023/24 Hong Kong Budget announcement on 22 February by Financial Secretary Paul Chan Mo-po, we submit our forecasts and recommendations to the Hong Kong government, aiming to make positive and sustained impacts for the economy, business community and individuals through our commitments to act.
Our forecasts on Hong Kong’s fiscal situation
HK$109 billion
budget deficit is estimated for 2022/2023.
PwC expects the HKSAR Government to record a HK$109 billion consolidated budget deficit for the fiscal year 2022/23, based on projected revenue of HK$681 billion and expenditure of HK$790 billion.
HK$848.1 billion
fiscal reserves is estimated as at 31 March 2023.
PwC estimates fiscal reserves of HK$848.1 billion as at 31 March 2023 – equivalent to around twelve months of total Government expenditure.
PwC’s recommendations
Support enterprises, relieve people’s burden
- To relieve the financial burden on businesses and individuals, we recommend that the Government continue to provide a 100% tax reduction of 2022/23 profits tax, salaries tax and tax under personal assessment, with an increased cap of HK$25,000 per case.
- Given the recent rise in interest rates, we suggest increasing the deduction cap for home loan interest to HK$150,000 per year of assessment and extending the maximum deduction period to 25 years. We also recommend the same adjustment to the deduction cap for domestic rent.
Attract businesses, investments and talents
- To introduce competitive tax, non-tax and financial incentives for companies that choose Hong Kong as their regional headquarters, trading or intellectual property hubs.
- To consider resuming the Capital Investment Entrant Scheme.
- To attract overseas talent by providing incentives such as housing subsidies, cash bonuses and tax deductions for children’s education, as well as better double tax relief.
Reinforce traditional advantages, develop emerging industries
- To further enhance Hong Kong’s status as an international financial centre by expanding the unified fund exemption regime to cover institutional asset owners, private fixed income and credit funds, as well as digital assets.
- To consider tax and financial incentives to encourage the financing of ESG projects.
- To develop tax policies to address emerging industries such as digital assets, the metaverse and Web3.
- To provide one-stop shop services to help talent register their self-developed intellectual property and start their entrepreneurship journey in Hong Kong.
Our professionals say
"While we are confident that the fiscal reserve will return to positive growth in the coming year – especially after the reopening of the borders – the Government should consider long-term plans for financing infrastructure through alternative means, such as securitisation and infrastructure funds."
“With the gradual lifting of travel restrictions and quarantine requirements around the world and the reopening of the borders with the Mainland, Hong Kong needs to get ready for a travel boom and to seize the opportunity to return to pre-COVID levels of economic growth. In line with the Government’s efforts to develop Hong Kong as an international shipping and aviation hub, we encourage the Government to work with other GBA cities to promote maritime and aircraft leasing.”
“It is important for the Government to consider all proposed plans and measures carefully and to take into account stakeholders’ concerns during implementation, and execute them efficiently and effectively through a Smart Government. The development or enhancement of such platforms, including the e-tax filing system, is critical. In particular, as tax rules become increasingly complex, the Government should make use of tools to administer the law and facilitate taxpayers’ compliance in a streamlined manner.”
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