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The Hong Kong government faced serious criticism from lawmakers and representatives of small business, the middle-class and grassroots sectors on Wednesday after its new budget failed to meet demands amid an unfavorable economic situation.
In his budget speech, Financial Secretary Paul Chan said the salaries tax would be waived for the fiscal year between April 1, 2021, and March 31, 2020, capped at HK$10,000 (US$1,290), down from HK$20,000 for the 2020/21 fiscal year.
All other handouts to the needy were also halved for the coming fiscal year. People will get an extra half a month’s worth of welfare, old-age and disability allowances, instead of a full month as before. Those receiving the government’s Working Family Allowance and Work Incentive Transport subsidy will also get an extra half-month’s payment.
Chan did not repeat last year’s HK$10,000 cash handout to the public, but offered HK$5,000 worth of “electronic consumption vouchers†to Hong Kong’s permanent residents and new immigrants aged 18 or above.
The vouchers will be given to consumers in five installments of HK$1,000, with people having to spend each installment before they can receive the next.
Chan also rejected some lawmakers’ suggestions about providing a one-off subsidy to those who had lost their jobs during the pandemic or allowing them to withdraw money from their Mandatory Provident Fund accounts.
Instead, he said the unemployed would be given access to low-interest loans of up to HK$80,000 that are fully guaranteed by the government.
The maximum loan amount is set at six times the applicant’s last monthly salary, while only 1% annual interest will be charged over five years. The interest rate is fully refundable provided the applicant repays the loan in full and on time.
Fiscal deficit
Chan said handouts were cut as the government would report a deficit of HK$257.6 billion in the current financial year, with the fiscal reserves expected to stand at HK$902.7 billion by March 31, 2021.
Mung Siu-tat, chief executive of the Hong Kong Confederation of Trade Unions (HKCTU), said he was disappointed with the budget as the government did not give the needy the same level of handouts it did last year.
“Last year the government spent more than HK$100 billion to support large companies but most money did not reach the hands of the workers,†Mung said. “A lot of workers have lost their jobs or been underemployed since Hong Kong was hit by the pandemic but the government did not take care of them.â€
Mung said the HKCTU had urged the government to set up an unemployment relief fund but the proposal was rejected for the reason that it would be difficult to check whether the applicants had lost their jobs.
Mung said it was ridiculous that the government could now have methods to identify the unemployed and lend them money.
Tang Ka-piu, a lawmaker representing the Hong Kong Federation of Trade Unions, said offering an HK$80,000 loan to the unemployed was not a bad idea, but it came too late as many workers had already started taking loans to cover their family expenses in the past few months.
Tang said the government could have spent more money on relief measures as its fiscal reserves were still above HK$900 billion. He said the Singapore government had spent up to 20% of the city-state’s gross domestic product to support the economy.
Consumption vouchers
When Hong Kong was hit by the first wave of Covid-19, the government announced it would deliver a HK$10,000 cash handout to all permanent residents. Some businessmen and economists said the handouts would not be able to help the hard-hit retail, dining and tourism sectors as most people tended to save the money or buy stocks.
They said resources would be wasted by cash handouts to those who continued to get paid during the epidemic, such as teachers and civil servants. They suggested the government deliver e-vouchers to boost domestic consumption.
Roundtable lawmaker Michael Tien said it would be a mistake to deliver the e-vouchers in five installments, instead of pumping the money into the economy in one go.
“The food business and the supermarkets … have never been a victim of the entire Covid pandemic period,†Tien said. “The victim of the Covid pandemic is actually the so-called impulse item purchasing businesses … entertainment and all that, and I don’t think this is going to help those industries.â€
Eddy Li Sau-hung, the President of the Hong Kong Economic & Trade Association, said Wednesday it was the right move to launch the e-vouchers. However, he also said most people would spend the vouchers in supermarkets, rather than to dine and shop. He said offering financial support to small-and-medium-sized enterprises was a more urgent task.
Chan said in his budget report that the government would earmark HK$934 million to boost tourism. He said HK$169 million of it would be used to promote local cultural, heritage and creative tourism projects, such as the Yim Tin Tsai Arts Festival and the City in Time.
The rest of the money would go to the Hong Kong Tourism Board for it to roll out promotional offers when cross-boundary travel resumed as Covid-19 eased.
Besides, the government would set aside HK$9.5 billion to help businesses ride out the impact of the Covid-19 pandemic, Chan said. About 128,000 businesses would enjoy a profit tax cut of up to HK$10,000 for 2020/21, he added.
The “Special 100% Loan Guarantee†scheme, launched last year to provide enterprises with low-interest loans and subsidies, would be extended by one year, while each company could receive up to 18 months’ worth of staff wages and rent, up from 12 months at present, Chan said.
Each business can receive up to HK$6 million, up from HK$5 million, and the maximum repayment period would be extended from five years to eight years.
Property prices
The latest budget was also criticized for providing no new solutions to control high property prices in the city. It reiterated its land sale program to supply sites that would provide about 16,500 private housing units for 2021/22. In the coming five years, the public housing supply will be about 101,400 units.
According to a report published by the Urban Reform Institute and Frontier Centre for Public Policy, Hong Kong remained the world’s least-affordable housing market for the 11th year. It was followed by Vancouver, Sydney and Auckland.
An index tracking the prices of private apartments in Hong Kong rose 0.13% to 380 in January from December, according to data compiled by the Rating and Valuation Department. Prior to this, the index had declined for three straight months.
Vincent Cheung, managing director of Vincorn Consulting and Appraisal Ltd, said property prices in Hong Kong would increase by up to 5% this year as the unemployment situation was limited to a few sectors.
On Wednesday, the government said it would increase stamp duty on stock transfers from 0.1% to 0.13% of the transaction value. Shares of Hong Kong Exchanges and Clearing closed 8.8% down at HK$509.
An HKEx spokesman said the bourse was disappointed with the government’s decision to raise stamp duty for stock transactions, but it understood that such a levy was an important source of government revenue.
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