Hong Kong pushes the ante in its budget

HK slashes taxes and doles out the goodies, with greater generosity than Singapore's, funded by its record budget surplus achieved in 2007.

Singapore achieved S$6.4 billion Budget surplus (equivalent to 2.7 per cent of GDP) while Hong Kong's record FY2007 HK$115.6 billion (S$20.7 billion) surplus - 7.2 per cent of GDP.

1. Both governments to give out tax rebates. 20% tax rebate, up to $2,000 for Singapore. For HK, 75% tax rebate on salaries and corporate tax, up to a ceiling of HK$25,000.
2. While Singapore holds its corporate and income tax rates steady, HK has decided to cut its headline corporate rate by 1% to 16.5% (Singapore - 18%). For income tax, HK's top tier rate is 15% compared to 20% in Singapore. That is HK's way of sharpening its competitive edge in the international arena.
3. In promoting entrepreneurship in its already highly entrepreneurial society, HK is waiving business registration fees for a year. Singapore has decided to develop its competitiveness for its future by placing its chips on specific targeted areas:-

• seeding Research and Development culture in all business entities in Singapore if possible, with tax grants and relaxation of restriction to perform R&D related to your existing business and;
• targeted incentives for specific financial and maritime industries, and tech start-ups.

4. While HK has decided to scrap its 40% tax on its wine and beer duty all together, Singapore has instead decided to moderate its liquor duties by charging duties based on its alcohol content.

5. On Green front, HK is ahead of Singapore with tax concessions for environmentally-friendly vehicles and even machinery. We were just lamenting the lack of concrete intention ie. $, by Singapore on this front.

6. For the lower income group in both economies,

HK will do the following:-

• mandatory pension payments - to inject cash of up to HK$6,000.
• extra month's payment under Comprehensive Social Security Assistance (CSSA).
• The elderly were also given additional funding of HK$60 million a year for day care, residential and infirmary places.
• Old Age Allowance recipients will also receive a one-off grant of HK$3,000, costing the government HK$1.5 billion.
• set aside HK$50 billion for health care financing in the ageing society.
• subsidy of HK$1,800 for electricity charges per household, costing the government HK$4.3 billion.

Singapore will do the following:-

• Singapore is disbursing some S$1.8 billion of 'growth dividends' to all Singaporeans still holding on to their shares.
• Another S$1 billion in benefits under a GST offset package unveiled earlier when the consumption tax rate was raised by two percentage points.

Reference
Anna Teo, A tale of the Budgets of two cities, Business Times, 29 Feb 2008.
Jane Moir, HK slashes taxes, doles out the goodies, Business Times, 28 Feb 2008.