ACCA (the Association of Chartered Certified Accountants) Hong Kong today delivered its tax policy recommendations for the 2021/22 Budget.
The past year has been a challenging year for the world including Hong Kong. The outbreak of Covid-19 has brought massive disruptions to business operations. With the evolving global trade disruption, the looming global economic recession coupled with political uncertainties as well as increasingly fierce competition from our neighbouring countries, Hong Kong is exposed to unprecedented challenges and new risks.
ACCA Hong Kong expects the HKSAR Government to have a consolidated budget deficit of HK$288 billion for the 2020/21 fiscal year. Facing great downward pressure upon the city’s economy, ACCA urges the Government to fulfill its role as a facilitator in the economic development, by introducing measures to help the business sector as well as the general public navigate through the unstable environment.
Mitigating the negative impact brought by pandemic
Introducing one-off special measures to navigate through economic hardship
With the outbreak of Covid-19 that bought about devastating social and economic impact, Hong Kong will be facing critical challenges in the near future. It is expected that the trend of rising unemployment rate and underemployment rate will continue. ACCA is of the view that the Government should launch more one-off relief measures to help businesses and citizens to navigate the difficult time.
Charles Chan, Co-chairman, Tax Sub-committee of ACCA Hong Kong said, ‘In view of the expected challenges and to help improve the cashflow of the companies in need, we recommend a cash refund by the Government of the tax amount in respect of the current year tax loss, calculated by applying the current profits tax rate of 8.25% or 16.5% on the tax loss, but capped at the amount of profits tax paid by the same entity in the last one or two years of assessment or HK$165,000 whichever is lower. We consider this only a timing difference instead of a loss of revenue to the HKSAR Government. This tax refund can significantly improve companies’ cashflow and help keep them afloat in difficult times. This can slow down healthy business closure, which can also be an effective measure to stabilise and ease unemployment.’
Charles continued, ‘In the early stage of the outbreak of Covid-19 when sanitising supplies were insufficient to meet the public demand, many companies leveraged on their procurement networks to source masks and sanitising products and donated them to the communities in need. To support those companies which helped the community fight against the pandemic but turned into a loss position for their own businesses, we suggest allowing one-off tax deduction to donation expenses by loss-making companies, capped at 35% of historical assessable profits or HK$700,000 (35% of $2 million profits) whichever is lower. This can demonstrate the HKSAR Government’s recognition of the commercial sector’s efforts in fighting against pandemic.’
Supporting the community in facing difficulties by reducing their tax burden
ACCA Hong Kong urges the Government to share its wealth accumulation from the city’s previous economic growth, to help alleviate people’s financial burdens arising from Covid-19.
Wilson Cheng, Co-chairman, Tax Sub-committee of ACCA Hong Kong said, ‘We propose granting a special one-off Covid-19 allowance of HK$10,000 per taxpayer and HK$10,000 per dependent of the taxpayer. The lowering of the salaries tax payable by individuals not only can reduce their tax burden, but also improves household cashflow and stimulates the economy. It also demonstrates the Government’s care and support to our working population.’
Wilson continued, ‘ACCA suggests introducing further tax relief measures to support Hong Kong citizens in facing anticipated economic difficulties, such as tax reduction for rental expenses. Both rental expenses and home loan interest costs are cost of livings of similar nature borne by taxpayers, we are of the opinion that they should have the same tax treatment. We suggest rental payment for taxpayers’ dwellings should enjoy the same tax deduction as home loan interest, which can be capped at HK$100,000 per annum.’
Supporting business investments under economic uncertainties
ACCA Hong Kong appreciates the Government’s commitment in supporting the development of technology and innovation. With the introduction of super deduction for qualifying R&D expenditure, it encourages corporations to invest in the development of high tech products. It also encourages entities to employ relevant R&D experts, generating new employment opportunities for our younger generation in this discipline.
Stanley Ho, Co-chairman, Tax Sub-committee, ACCA Hong Kong said, ‘We recommend the super tax deduction be extended to expenditures incurred and paid to companies or research institutes in the Greater Bay Area. This not only encourages more investment in the R&D work, but also offers companies greater flexibilities on location and manner of the R&D work is conducted.’
Stanley continued, ‘We recommend that apart from allowing the super tax deduction of the designated expenditures incurred by companies for the production, creation, registration and acquisition of intellectual properties, income generated from the subsequent exploitation of these intellectual properties should also be subject to a reduced tax rate, i.e. 8.25%. This tax incentive will help establish Hong Kong as the intellectual properties (IPs) hub of the Asian region.’
The ACCA Hong Kong Budget Proposal 2021/22 is available online at:
Media Enquiry Hotline on the 2021/22 Budget:
+852 2973 1112 (24 February 2021)
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+852 2973 1112
About ACCA: ACCA is the Association of Chartered Certified Accountants. We’re a thriving global community of 227,000 members and 544,000 future members based in 176 countries that upholds the highest professional and ethical values.
We believe that accountancy is a cornerstone profession of society that supports both public and private sectors. That’s why we’re committed to the development of a strong global accountancy profession and the many benefits that this brings to society and individuals.
Since 1904 being a force for public good has been embedded in our purpose. And because we’re a not-for-profit organisation, we build a sustainable global profession by re-investing our surplus to deliver member value and develop the profession for the next generation.
Through our world leading ACCA Qualification, we offer everyone everywhere the opportunity to experience a rewarding career in accountancy, finance and management. And using our respected research, we lead the profession by answering today’s questions and preparing us for tomorrow.
ACCA now has 27,000 members and 154,000 future members in China, with 11 offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Shenyang, Qingdao, Wuhan, Changsha, Hong Kong SAR and Macau SAR.
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