HONG KONG: Hong Kong’s tax revenue is set to further shrink to HK$286 billion by the end of next March, partly due to an expected 22 per cent plunge in stamp duty for property transactions. The Inland Revenue Department on Tuesday announced that overall tax revenue collected in the 2016-17 financial year was HK$290.2 billion, down about HK$1.1 billion or 0.4 per cent from the previous fiscal year.
The revenue drop for a second consecutive year was attributed mostly to a waiver of business registration fees. In 2015-16, the taxman collected HK$291.3 billion – a 4 per cent drop. Of the total collected, nearly half, or HK$139.2 billion, was from profits tax, while salaries tax accounted for some HK$59.1 billion. With the expiry of the one-year waiver of business registration fees, the department expected to collect some HK$2.6 billion from this source in 2017-18, from only about HK$228 million in 2016-17.
Commissioner of Inland Revenue Wong Kuen-fai estimated property stamp duty would contract by 22 per cent to HK$29.2 billion in 2017-18. Wong declined to speculate on the outlook of the property market, only saying the department’s estimates were based on “a basket of factors”, including the market trend and volume of transactions affected by government cooling measures. On higher income from stamp duty measures introduced since last November, Wong said the government coffers could become the victim of their success. “It is a demand-side management measure. In plain English, it is to discourage people from buying. So, if the measure is successful, the stamp duty revenue could be hit,” he said. In an attempt to dampen speculation in the residential property market, the government last November increased the stamp duty for all residential property transactions to a flat rate of 15 per cent. Last month it further tightened the measure to cover first-time homebuyers who acquire multiple flats using only one sales and purchase agreement.
