Hong Kong: Tax Cuts, Capital Spending Plans Announced

Hong Kong’s government announced a temporary 50 percent salary tax reduction for 1.4 million taxpayers on Feb. 25, along with increased spending on infrastructure, as part of a plan to bolster the economy, which faces its first full-year contraction in more than a decade. In a budget speech to lawmakers, Financial Secretary John Tsang said the one-off tax cut, effective for 2008-09, would be capped at HK$6,000 (US$774) for salary earners and cost about HK$4.1 billion (US$528.8 million). The government also plans to spend HK$39.3 billion (US$5 billion) on capital works projects for 2009-10, as well as HK$1.6 billion (US$206.3 million) over 3 years to create 62,000 jobs and internships, and it will launch a program selling government bonds. Tsang said Hong Kong will run budget deficits for the next five years.