Hong Kong Unveils Fiscal Policy to Spur Economic Growth in 2023

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Hong Kong's Financial Secretary, Paul Chan, presented the fiscal policy for 2023 on February 22, 2023. The budget proposals aim to support enterprises, the general public, the digital economy, and innovation and technology. The proposals include a slash in profits tax, schemes to support companies' re-domiciliation to Hong Kong, tracking manpower demands, and facilitating SMEs in digital transformation. The city's economic performance is expected to rebound this year, with a forecast of 3.5% to 5.5% growth for 2023, following a 3.5% contraction in 2022.

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Here are some of the key measures include:

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Supporting Enterprises:

• Profits tax for the assessment year 2022/23 will be reduced by 100%, subject to a $6,000 ceiling.
• Rates concession for non-domestic properties will be provided for the first two quarters of 2023/24, subject to a ceiling of $1,000 per quarter.
• Eligible tenants of government premises and short-term tenancies will be granted a 50% rental fee concession, and waivers will be provided for six months.
• The application period of all guarantee products under the SME Financing Guarantee Scheme will be extended to March 2024.
• Schemes to support companies re-domiciliation to Hong Kong
• Inject $500 million into the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) and expedite the processing of applications.

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Supporting the General Public:

• Issue $5,000 electronic consumption vouchers to each eligible Hong Kong permanent resident and new arrival aged 18 or above in two instalments.
• Salaries tax and tax under personal assessment for the 2022/23 assessment year will be reduced by 100%, subject to a $6,000 ceiling.
• Rates concession for domestic properties will be provided for the first two quarters of 2023/24, subject to a $1,000 ceiling per quarter.
• Each eligible residential electricity account will be granted a subsidy of $1,000.
• The current arrangement of distributing electricity charges relief of $50 a month to each account will be extended to end 2025.
• The basic child allowance and the additional child allowance for each child born during the year of assessment will be increased from $120,000 to $130,000.

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Digital Economy:

• A feasibility study will be conducted on the development of an Artificial Intelligence Supercomputing Centre.
• $500 million will be earmarked to launch a Digital Transformation Support Pilot Programme to assist SMEs in applying ready-to-use basic digital solutions.
• $200 million will be allocated to enhance the operation of the "iAM Smart" platform to improve user experience.
• Issue HKD 10 billion in funding to step up investment in innovation and technology, with HKD 400 million to be distributed for supporting start-ups
• Over $260 million reserved for Cyberport to nurture smart living start-ups.
• HKSTPC will inject $400 million into its Corporate Venture Fund and inject an additional $110 million to launch the Co-acceleration Programme.

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Innovation and Technology:

• $6 billion will be allocated to universities and research institutes to set up thematic research centers related to life and health technology.
• $3 billion will be earmarked to enhance basic research in frontier technology fields such as artificial intelligence and quantum technology.
• A Microelectronics Research and Development Institute will be established to enhance collaboration among universities, R&D centers, and the industry, expediting "1 to N" transformation.
• Over $260 million will be reserved for Cyberport to nurture smart living startups.
• HKSTPC will inject $400 million into its Corporate Venture Fund and inject an additional $110 million to launch the Co-acceleration Programme.
• A feasibility study will be conducted on setting up the second Advanced Manufacturing Centre.

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Attracting Enterprise and Talents::

• Introduce a mechanism to provide facilitation for companies domiciled overseas for re-domiciliation to Hong Kong.
• Introduce a new Capital Investment Entrant Scheme: applicants may reside and pursue development in Hong Kong after making investment at a certain amount in the local asset market, excluding property.

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In conclusion, the budget proposals reflect the Hong Kong government's commitment to promoting economic growth, innovation, and social development, while also providing financial support and relief to businesses and individuals. With a forecast of 3.5% to 5.5% growth for 2023, Hong Kong's economic performance is expected to rebound, and the budget proposals aim to support this recovery.