KPMG Commentary

The Financial Secretary, the Honourable John C Tsang, presented his ninth Hong Kong Budget speech on 24 February 2016. In terms of overall economic performance in 2015, the Financial Secretary reported a headline inflation rate of 3 percent, with the underlying inflation rate at 2.5 percent. Looking ahead, he forecast that the headline inflation rate for 2016 will be 2.3 percent, with the underlying inflation rate at 2 percent. The Financial Secretary also announced an overall budget surplus forecast of HKD 30 billion for 2015/16.

The Budget speech reflects in many ways a ‘business as usual’ approach, with few substantial new or longer term initiatives introduced or flagged. One-off relief measures such as reductions in Profits Tax and Salaries Tax payable for 2015/16, increases in personal allowances, and waivers of rates and fees continue to be a recurring theme. Particular industries highlighted for additional/specific support included the tourism industry.

The Financial Secretary also discussed what he described as the ‘New Economic Order’. In his view, key to embracing this is nurturing innovation, and he highlighted a series of achievements and future initiatives. He also mentioned KPMG as being one of the international firms which have chosen to establish laboratories and incubation programmes in Hong Kong. Unfortunately, however, the proposals stopped short of where certain other jurisdictions have particularly headed, for example, in the case of tax incentives for research and development activities.

While many of the one-off or short-term measures are welcome, there continues to be little in the way of obvious long-term/strategic focus on the part of government. The key exceptions to this are the Housing Reserve set up in support of public housing development, the HKD 200 billion set aside for the 10-year hospital development plan, and the Future Fund. All of these are positive moves. On a separate note, we look forward to the government’s early implementation of the few new matters raised, as well as those raised in prior years.

Proposed Measures

KPMG China recently conducted a survey of over 300 senior business executives about their business concerns in Hong Kong and their expectations regarding the 2016-17 Hong Kong Budget. We summarise below how the 2016-17 Budget proposes to address some of the concerns identified in the KPMG survey.

  • Improving standards of living

    Improving standards of living
    • Set aside HKD 200 billion for a 10-year hospital development plan
    • Reduce Salaries Tax and Profits Tax payable by 75%, capped at HKD 20,000
    • Increase the basic allowance to HKD 132,000 under Salaries Tax
    • Provide one extra month’s allowance to recipients of the CSSA Scheme, Old Age Allowance, Old Age Living Allowance and Disability Allowance
  • Retirement protection

    Retirement protection
    • Launch another iBond issue of up to HKD 10 billion
    • Issue Silver Bonds for Hong Kong residents aged 65 or above
    • Explore extending the coverage of the Reverse Mortgage Programme
    • Increase allowances for maintaining a dependent parent or grandparent aged 60 or above to HKD 46,000



  • Increasing competitiveness

    Increasing competitiveness
    • Launch the three-year Pilot Technology Voucher Programme for SMEs, with subsidies capped at HKD 200,000
    • Increase cash rebates for R&D activities to 40%
    • Set up a HKD 2 billion Innovation and Technology Venture Fund
    • Extend tax deductions for intellectual property purchases
  • 'Belt and Road'

    Belt and Road
    • Examine tax concessions for the aircraft leasing business
    • Have the Hong Kong Monetary Authority establish an office to facilitate the financing of infrastructure projects
    • Issue the third sukuk
    • Increase internship places in the mainland and ASEAN countries

Latest Tax Publications

KPMG China regularly issues high-quality thought leadership publications. These are the latest KPMG publications for Tax services.

Contact Us

For enquiries relating to this summary, please email us at hkbudget.hk@kpmg.com. For other tax matters, please contact any of the following KPMG tax professionals:

To find out more about our services or to identify your KPMG contact, please use our contact form to get in touch.