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SCMP Reporter

Financial Secretary Paul Chan Mo-po has sought to be more aggressive than his predecessor in shaping public finances with his maiden – and perhaps last – budget speech, vowing to review the city’s tax system but retain fiscal prudence.
Making a case for change from the previous finance chief, John Tsang Chun-wah, who quit the job in December to run for the city’s leadership, Chan spelled out more proactive moves for taxes, the use of surpluses and land revenue forecasts. The formula for projecting land revenue will be updated for greater accuracy.
“To me, the budget is not just a collection of cold hard figures. It also indicates the priorities set by the government in resource allocation, reflecting the values we hold,” Chan said.
On tax, a policy unit will be set up to explore broadening the city’s tax base and examining the international competitiveness of Hong Kong’s tax regime.


Budget 2017: financial secretary announces salaries tax cut; new tax policy unit
A recurrent measure will see the marginal bands for salaries tax widened to reduce the tax burden for 1.3 million taxpayers. The last time the tax bands were broadened was in 2008, by Tsang.
The government can end up looking too timid in tackling challenges such as pension and health care funding
Duncan Innes-Ker, Asia director at the Economist Intelligence Unit
Chan also undid Tsang’s policy of depositing part of the annual surplus into a Future Fund he set up in 2015. Instead of saving the surplus for unspecified uses, Chan said this year he would spend HK$61 billion, or 65 per cent of last year’s surplus, on services for the elderly and the disabled, sports, innovation and technology and youth development.
Commentators saw the budget as mapping out not only a long-term vision for the city’s future but also Chan’s own ambition to stay in the job when his term expires in July. He said on Wednesday none of the chief executive contenders making a bid for the city’s top job had invited him to join their cabinet if they win.
And Chan had formidable financial muscle to flex on Wednesday when he unveiled a budget replete with a higher-than-expected surplus of HK$92.8 billion from the last financial year – a record high since the 2008 financial crisis. The rise was attributed to surges in land and stamp duty revenues, with the former at a historic high. Fiscal reserves are expected to reach HK$935.7 billion by the end of next month.
Hong Kong review vital to overcome problems with narrow tax base
But Chan also forecast soaring expenditure on the many ongoing infrastructure projects in the city, which will edge up to HK$100 billion in 2017-18 and remain on the rise in the next four years.
Noting the apparent abundance in the government coffers, Chan said: “I believe the two objectives of our fiscal policy are maintaining healthy public finances and strengthening resilence to withstand economic fluctuations.
“We should spend only when necessary and make good use of the reserves to benefit society,” he continued, citing uncertainties in the global economic environment and stressing the need to maintain “strict fiscal discipline”.
Where Chan stuck to the tried-and-tested route of his predecessor was in handing out one-off “sweeteners”, this time totalling HK$35.1 billion, including reductions in salaries and profits taxes, a waiver of rates for four quarters, and an extra one-month allowance for welfare recipients.
Not everyone was impressed by Chan’s strategy. Duncan Innes-Ker, Asia director at the Economist Intelligence Unit, said he saw little difference between Chan’s budget and previous ones, as he had continued to take a cautious approach to spending the huge fiscal surplus.
Social welfare sector sees HK$30 billion for elderly services and mentally ill
“The government can end up looking too timid in tackling challenges such as pension and health care funding,” Innes-Ker said, noting that the HK$92.8 billion surplus was almost twice the HK$50 billion set aside for the voluntary health insurance scheme.
Chinese University political scientist Ivan Choy Chi-keung said Chan’s concept of public finance in the budget could indicate his wish to seek public recognition and stay in his current position beyond the six-month term, and that he agreed with some concepts upheld by Tsang, such as sustainability and prudence.
Tsang said it was not appropriate for him to comment on the budget. The Basic Law had clear guidelines on public finance, he said, and he had been acting prudently in accordance with that in his nine and a half years as the finance chief, promoting economic development, improving livelihood and investing in the future--the same phrases used by Chan on Wednesday.
Another chief executive contender, Carrie Lam Cheng Yuet-ngor, said the government should think of new ways to spend the huge reserves to promote economic development and improve livelihoods.
A third contender, Regina Ip Lau Suk-yee, said Chan had only “followed the rules” in setting out his budget, with the exception of the promise to review the tax system.
Woo Kwok-hing, also a contender, said the huge reserves justified the feasibility of a universal retirement protection scheme that the current administration has refused to implement.


Why are Hong Kong bureaucrats such misers when it comes to spending on needed services?

Hong Kong chief executive Carrie Lam says city’s next budget could be ‘full of surprises’

Balancing act appears on the cards for Hong Kong budget

We must invest in Hong Kong’s future, not dish out sweeteners, finance chief says

Hong Kong Budget 2017-2018

Finance chief Paul Chan unveils aggressive plan to boost Hong Kong’s competitiveness in maiden budget

Financial Secretary Paul Chan Mo-po unveiled his maiden budget for Hong Kong on Wednesday. Photo: Xiaomei Chen

Finance chief Paul Chan unveils aggressive plan to boost Hong Kong’s competitiveness in maiden budget

Commentators saw the budget as part of Chan’s own ambition to stay in the job