HONG KONG SAR - Media OutReach Newswire - 22 January 2025 -With CPA Australia estimating a fiscal deficit of HK$96.1 billion for 2024-25 and fiscal reserves of HK$638.5 billion, today, we submitted recommendations for the government to consider including in Budget 2025-26, with the major focus areas being tackling the deficit and building Hong Kong's prosperity. Explore strategies to increase revenue and reduce costs CPA Australia emphasises the need to explore innovative strategies for increasing revenue and optimising public expenditure. One suggestion is expanding the application of the user-pays model to a broader range of government services, provided fees remain affordable. Ms Karina Wong, 2025 Greater China Divisional President stated, "Our proposals are designed to help the government navigate fiscal challenges, attract investment and strengthen Hong Kong's global competitiveness. A cornerstone of Hong Kong's success has been its low and simple tax system, and this must be preserved. Therefore, we encourage the government to prioritise raising revenue from non-tax sources, such as modestly raising fees on some government services. Ms Wong highlighted that unlike Hong Kong, other advanced economies generate significant revenue through various levies, fees, and charges. She noted for example that Hong Kong generates only about 1 per cent of the revenue Australia does from visa processing fees and Hong Kong's passport fees are much lower than many jurisdictions. "While we are not suggesting the government raise fees to match those of other advanced economies, there is scope for modest adjustments to better reflect their costs," she said. To support this, CPA Australia recommends the adoption of standardised cost-recovery policy, provided fees are set at affordable rates and increases limited. To drive efficiencies, the cost-recovery fee should be set at the cost of efficient service delivery rather than the actual cost, which could be higher. Additional revenue-generating proposals include raising fines and penalties, such as illegal parking fines and increasing tobacco duty from 65 per cent of the cost of a packet of cigarettes to the World Health Organization (WHO) recommended 75 per cent. We also suggest exploring highly targeted new taxes, such as a digital services tax on large digital providers and a carbon tax on major greenhouse gas emitters. Attract foreign investment and corporations To attract more investment funds and family offices to Hong Kong and encourage them to invest locally, we recommend further enhancements to the tax regimes for investment funds and family offices. Mr Anthony Lau, co-chairperson of CPA Australia's Greater China Taxation Committee suggested "To boost the property market, Hong Kong should include local real estate investments, both residential and non-residential with a minimum investment requirement of HK$50m, as tax exempt assets under unified fund exemption and single family office concession regimes, capped at 30 per cent of total assets under management. Another measure related to supporting the property sector is to give first home buyers a temporary stamp duty reduction of 50 per cent. This could help young Hong Kongers buy their first home, which not only benefits them but the broader economy and society." Mr. Lau also said "The Hong Kong Government can initiate consultations with the Central Government to establish a "Family Office Connect" channel to facilitate cross-border investments by Mainland high-net-worth individuals through family offices established in Hong Kong. The first step in implementing this scheme would be to pilot it in the Greater Bay Area before extending it to the rest of the Mainland. On infrastructure, Mr Lau emphasised the importance of timely delivery of major projects despite fiscal constraints. "To maintain Hong Kong's competitiveness, we suggest the government consider the broader use of public-private partnerships for infrastructure projects. This approach helps to reduce the government's share of costs and risks." Support SMEs and attract talent Small and medium-sized enterprises (SMEs) have faced numerous challenges in recent years. Mr Janssen Chan, co-chairperson of CPA Australia's Taxation Committee for Greater China proposes, "In light of the difficulties faced by SMEs, it is crucial for the government to continue supporting them to foster their growth and success. We suggest increasing the threshold for the half profits tax rate from HK$2 million to HK$3 million, and provide a 100 per cent tax rebate on...