Budget balances pressing needs and prudence

Given that Hong Kong’s fiscal health has been under strain, with a record annual fiscal deficit on the horizon after several rounds of massive stimulus and relief measures that cost the government some HK$300 billion ($38.7 billion) to buffer the impact of the triple whammy of the Sino-US trade row, social unrest and COVID-19 on the local economy and livelihoods of Hong Kong people, many commentators had not held high hopes for more meaningful dole-outs to be announced in the 2021-22 Budget.

It turns out that the SAR government’s latest budget plan, unveiled by Financial Secretary Paul Chan Mo-po on Wednesday, is a pleasant surprise to Hong Kong residents.

The financial chief rolled out another round of countercyclical measures at a total cost of more than HK$120 billion to further alleviate people’s burdens and pressure caused by the economic downturn and the pandemic, and to help stabilize the economy.

These one-time measures — including consumption vouchers worth HK$5,000 for each adult resident, salaries tax reduction, the creation of another 30,000 temporary jobs, rates concession for both residential and nonresidential properties, and many others aimed at reducing the operating cost of businesses — will go a long way in helping the public and enterprises ride out the current downturn.

Of course, more is better when it comes to “sweeteners”, or dole-outs, especially at a time when Hong Kong’s economy is in its worst shape and the unemployment rate is at its highest in over a decade. But the financial chief had to strike a delicate balance between the needs for short-term relief and maintaining fiscal health, which is crucial to the small, open economy of Hong Kong. And arguably, he did a good job in this regard.

The plan to raise the stamp duty on stock transactions to 0.13 percent from the current 0.1 percent is a judicious decision. The moderate increase is unlikely to dampen the sentiment of the stock market in the long run. Arguably, this is the only available revenueboosting means for the government, other than raising vehicle fees. In the long run, the rates of the profits tax and salaries tax, the government’s major sources of revenue, will have to be revised to help refill the much-drained public coffers when both life and business are back to normal.

The financial chief is to be applauded for having his new budget plan zoom out to a broader picture beyond the short-term needs of society. He unveiled plans to develop the digital economy, further innovation-and-technology development, explore more diversified markets, and attract enterprises, investors and talent to Hong Kong with the aim of achieving diversified and sustainable development of the economy.

He also envisioned stepped-up efforts for the SAR to proactively participate in national development, particularly by taking part in the “internal circulation” of the “dual circulation” strategy by taking advantage of the GuangdongHong Kong-Macao Greater Bay Area as an entry point, while continuing to explore international economic and trade opportunities by taking advantage of the Belt and Road Initiative and regional/international free-trade pacts struck by China with its partners.

While the new budget might have not appeased everyone, it is fair to say the financial chief did the fiscal math in a responsible way, striking a good balance between society’s shortterm needs and maintaining fiscal prudence, while having a clear vision for future economic development.