Companies and individuals in Hong Kong can now pay their taxes in instalments while small firms will get subsidies for their utility bills as the government unveils its latest relief measures worth about HK$4 billion (US$512 million) to help them cope with the onset of recession.
Financial Secretary Paul Chan Mo-po announced the measures on Wednesday with the aim of easing the cash flow of small and medium-sized enterprises (SMEs) and to boost investor confidence, as the economy reels from the double whammy of the ongoing protests and the US-China trade war.
The fresh measures will include penalty-free instalments for 2018-19 tax bills for individuals and companies. Commercial users will receive cash subsidies for water and sewage charges, rent and rates and electricity bills, Chan said.
To throw the operator a lifeline, the government will charge a floating rent at the city’s Kai Tak cruise terminal, while existing individual tenants will have their rents waived.
“The latest round of measures will be helpful in easing SMEs’ cash flow,” Chan said. “We aim to support companies, preserve jobs and stabilise investors’ confidence.”
The measures add up to HK$3.3 billion but Chan said that, among other things, the total would be about HK$4 billion.
Individuals and companies will be allowed to settle their tax bills in instalments within a year, contrary to the existing practice where a late payment is subject to a 5 per cent surcharge.
There are about 1.9 million people paying salaries tax in Hong Kong.
Tax bills will be dispatched in January, later than the usual September or October, which allowed time for concessions to be passed through the Legislative Council. The Legco meetings were delayed for four months while the vandalised chamber – stormed and trashed by radical protesters on July 1 – was repaired.
The concessions were passed and gazetted in November.
Asked if paying tax by instalment was open to all, Chan said: “For instance, with a married couple, say one of them is laid off and they find it difficult to meet tax payments on time, then they may apply to the Inland Revenue Department to have payments rearranged by instalment. It's case by case on justifiable circumstances.”
On utilities charges, the government will subsidise commercial users by paying 75 per cent of their electricity bills, capped at HK$5,000 per month, for the next four months to March 31. Some 430,000 commercial users will be financed by up to HK$20,000, costing the government HK$2.3 billion.
Commercial users will also be exempt from paying 75 per cent of their water and sewage charges, with water fees capped at HK$20,000 per month and sewage charges at HK$12,500 per month over the same period. This will cost the government HK$340 million and benefit about 250,000 commercial users.
As for government rates, for commercial accounts the waiver would rise to HK$5,000 compared with HK$1,500 previously. With there being 260,000 owners of commercial properties, this will cost the government HK$600 million.
To help the recycling industry, the government earmarked HK$100 million as rent subsidies for operators.
“There are different needs in different industries,” Chan said. “We hope to directly benefit key industries hit hard by social events.”
Chan said some measures would require the government to apply for budget approval from Legco and some involved amendments to by-laws.
“ We will start applying as soon as possible. We also see [Legco’s] Finance Committee has already started reviewing our previous budget applications. We sincerely hope and appeal to legislators from different parties to feel the urgency of citizens’ needs and approve our applications as soon as possible,” he said.
The new measures are on top of more than HK$21 billion in sweeteners the government has unveiled over the past four months, including a string of waivers on government fees for companies, fuel subsidies for the logistics industry, and cash incentives for travel agents, plus allowances for students and low-income groups.
The measures altogether were expected to generate 2 per cent growth to the city’s gross domestic product (GDP), which would in turn offset the estimated 2 per cent loss from the economy because of the civil unrest.
The city's biggest business group, the Hong Kong General Chamber of Commerce, welcomed the latest measures, saying they would help SMEs weather the protests and the trade war over the short term.
However, business and clients would not return unless normality was restored as soon as possible, chamber chairman Aron Harilela said.
“In the chamber’s business prospects survey that we released last week, 63 per cent of respondents said that healing societal divisions and restoring law and order would be the most useful measure to support their business,” he said.
“The longer the unrest is allowed to continue, the more damage is inflicted on society and the economy as we become entrapped in a downward spiral.”
Hong Kong has been rocked by violent anti-government protests since June, which, coupled with the US-China trade war, has pushed the city into a recession. The economy shrank 3.2 per cent in the third quarter, from the previous one, while GDP was down 2.9 per cent in the third quarter year on year, the biggest contraction in a decade.
The government forecast GDP would shrink 1.3 per cent this year from 2018. Last year, it jumped 3 per cent from 2017.
US-based financial institution the International Monetary Fund estimated Hong Kong’s GDP would contract 1.2 per cent this year. On Wednesday, it downgraded its forecast on the city’s GDP to 1 per cent growth in 2020 from a 1.5 per cent rise previously, and called for more stimulus measures.
More from South China Morning Post:
- For struggling Hong Kong firms, rent cuts and return to peace more valuable than latest relief measures
- A tale of 82 cities: survey shows expats fell out of love with Hong Kong long before violent anti-government protests hit
- Hong Kong anti-government protests bring biggest retail slump on record, as finance minister Paul Chan reveals cost to overall economy
This article Hong Kong economy: government announces fourth wave of relief measures worth about HK$4 billion, including tax instalment plan and subsidies for small firms first appeared on South China Morning Post