Hong Kong’s long-running property market downturn has become a growing threat to its low-tax hub status, experts have warned, as years of fiscal deficits force the government to seek new revenue sources.
The city will need to consider reviewing its tax structure when financial secretary Paul Chan unveils its budget next week, according to economists and multiple people close to policymakers in the territory.
Hong Kong’s government has historically relied on land sales for revenue, imposing low rates on income and corporate profits — with a progressive salaries tax topping out at 17 per cent — and no capital gains or sales taxes.
But a years-long slowdown in China’s property market, combined with the rising costs of the city’s ageing population, have weighed on Hong Kong’s balance sheet.
The territory, which still boasts low debt and high fiscal reserves, has recorded deficits in four of the previous five financial years, and Chan has forecast another for 2024-25, raising alarms about Hong Kong’s future financial health.
A Hong Kong lawmaker who asked to remain anonymous said increasing the income tax for high earners had been “floated” among other ideas in recent budget consultations with officials.
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