After three years of the epidemic, all industries in Hong Kong have withered, and the economy is stagnant. The Hong Kong government said earlier, considering the poor situation of retail and other industries, it will issue consumer coupons after the financial deficit, but the amount will be reduced to 5,000 yuan, but the other side is “pouring money” “Falling into the sea”, promoting the recovery of Lantau tomorrow and the development of the northern metropolitan area has caused a financial situation the Hong Kong government to be reduced from the constant growth in the past to the left and right today. The Secretariat of the Legislative Council released a research report on the “Financial Budget” It points out that Hong Kong’s financial reserves have decreased by 353.6 billion yuan in the past four years, a decrease of up to 30%. The total annual loss is more likely to be as high as 564.9 billion yuan or close to 50%. Current fiscal reserves are only sufficient to cover 12 months of government spending, the lowest level for 27 years. The study also pointed out that Hong Kong’s tax base is narrow and volatile, noting the International Monetary Fund’s recommendation for “comprehensive tax reform”.
Fiscal funds at the lowest level for 27 years
According to the report, under the continuing impact of the new crown epidemic, Hong Kong’s public financial situation has undergone major changes. Compared to the peak in March 2019, fiscal reserves have decreased by 353.6 billion yuan , a discount of up to 30%. The report also mentioned that if it were not for the issuance of bonds and the elimination of housing reserve balances, the total loss of fiscal funds in the past four years might have reached as high as 564.9 billion yuan, a decrease of 48%. . Current fiscal reserves are only enough to cover 12 months of government spending, the lowest level for at least 27 years.
The debt increase ratio raises public suspicions
The report mentioned that the increase in government debt in recent years has also raised social concern The outstanding amount of green bonds in Hong Kong has risen rapidly in recent years, causing a balance ratio its unpaid loan to GDP rose from 0.3% to 4.3% in the last four years causing public concern. However, according to the International Monetary Fund (IMF), if government assets are used to offset part of the government’s general debt, only 4 of the 35 developed economies in the world have no net debt, namely Hong Kong, Singapore, Luxembourg and Norway. It shows Hong Kong’s strong public financial strength, but comments also warn Hong Kong not to follow the old path of heavily indebted Western economies.
The IFC is calling for comprehensive tax reform
The public is concerned about the long-term affordability of Hong Kong’s public finances, including persistent fiscal deficits, highly depleted reserves, increasing government debt, and a narrow and volatile tax base. Although the authorities review the issue of a narrow tax base from time to time, so far they have not introduced any important measures to widen the tax base. I believe that this is based on the principle of prudence and does not want to shake Hong Kong’s “low. tax rate, simple and competitive tax system”, which is highly praised by Cornerstone. In the face of persistent fiscal deficits, voices are calling for tax reform again, and the National Institute also suggested that Hong Kong carry out “comprehensive tax reform” to expand the tax base and rebuild fiscal buffer space.
