Hong Kong to Cut Taxes, Boost Welfare After Growth Slows

Hong Kong’s government plans to reduce taxes, increase welfare spending and support tourism-related businesses after economic growth slowed last year.

Measures announced in its budget include reducing personal tax by as much as HK$20,000 ($2,580) this financial year, providing extra allowances for the poor and elderly, and waiving some fees for the tourism industry, the government said.

Rival financial center Singapore this week also announced plans to strengthen social security support for older workers. In Hong Kong, the government faces the additional challenge of trying to restore confidence after pro-democracy protests froze parts of the city late last year and push through the legislation to reform the city’s leadership election in 2017 that sparked the student-led demonstrations.

“The government is still relying too much on the one-off, ad hoc relief measures,” said Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd. in Hong Kong.

The government said it will waive license fees for some travel agents, hotels and restaurants for six months, as well as allocate additional spending to promote Hong Kong to international investors and tourists.

“We need to rebuild international investors’ and tourists’ confidence in Hong Kong and uplift our international image,” the government said.

In January, the Hong Kong Tourism Board started a new round of publicity in Japan, Korea, Southeast Asia and major mainland China cities, according to the budget document.

‘Political Bickering’

“The occupy movement affected tourism, hotel, catering, retail and transport industries,” the government said Wednesday. “Prolonged political bickering is detrimental to public administration and the international image of Hong Kong as a stable, law-abiding and efficient city.”

Some industries will benefit from the one-time measures, Young Sun Kwon, a Hong Kong-based economist at Nomura Holdings Inc., said in a telephone interview.

“The Hong Kong government is moving in the right direction,” he said. “This one-off relief will help some of the sectors negatively affected by recent political unrest.”

Gross domestic product growth slowed to 2.3 percent in 2014, and moderated to 0.4 percent in the fourth quarter from the preceding three months. For 2015, the government forecast economic growth of 1 percent to 3 percent. The labor market is forecast to remain stable, while imported inflation “will remain mild.”

The government also plans to establish a Future Fund for long-term savings later this year, with an initial HK$220 billion.

 

Source from http://www.bloomberg.com/news/articles/2015-02-25/hong-kong-gdp-growth-s...