Hong Kong SAR, 24 January 2025 – CPA Australia has projected a fiscal deficit of HK$96.1 billion for 2024-25 alongside fiscal reserves of HK$638.5 billion. In light of this, the organisation has put forward a series of recommendations for the government to consider in the 2025-26 Budget. The proposals primarily focus on reducing the deficit and driving Hong Kong’s economic prosperity.
Exploring Revenue Growth and Cost Optimisation Strategies
CPA Australia has underscored the importance of adopting innovative strategies to increase revenue and streamline public expenditure. One suggestion involves broadening the application of the user-pay model across more government services, provided that fees remain affordable.
Ms. Karina Wong, the 2025 Greater China Divisional President, stated, “Our recommendations aim to support the government in addressing fiscal challenges, attracting investment, and enhancing Hong Kong’s global competitiveness. A key factor in Hong Kong’s success has been its simple and low tax structure, which must be preserved. Therefore, we advocate for the government to prioritise revenue generation from non-tax sources, such as incrementally raising fees for some government services.”
Ms. Wong noted that Hong Kong’s revenue from levies, fees, and charges is significantly lower than in other advanced economies. For instance, the city generates only a fraction of the revenue that Australia does from visa processing fees, while Hong Kong’s passport fees are considerably lower than those in many other jurisdictions. “Although we do not propose matching fees to those of other economies, there is room for modest adjustments to better reflect the costs involved,” she added.
To ensure fairness, CPA Australia recommends implementing a standardised cost-recovery policy where fees are pegged to the cost of efficient service delivery rather than actual costs, which may be higher. Additionally, other revenue-generating ideas include increasing fines for illegal parking and raising the tobacco duty from 65% to the World Health Organisation’s recommended 75%. The organisation also suggests introducing targeted new taxes, such as a digital services tax on major digital providers and a carbon tax on large greenhouse gas emitters.
Encouraging Foreign Investment and Corporate Growth
To attract more investment funds and family offices to Hong Kong, CPA Australia proposes enhancing tax regimes for these entities.
Mr. Anthony Lau, co-chairperson of CPA Australia’s Greater China Taxation Committee, remarked, “To revitalise the property market, Hong Kong should consider including local real estate investments—both residential and non-residential—under unified fund exemption and single-family office concession regimes, with a minimum investment threshold of HK$50 million. This could be capped at 30% of total assets under management. Additionally, providing first-time homebuyers with a temporary 50% reduction in stamp duty could assist young residents in purchasing their first home, benefiting both individuals and the broader economy.”
Mr. Lau also suggested that the government explore creating a “Family Office Connect” channel in collaboration with the Central Government. This initiative would allow Mainland high-net-worth individuals to make cross-border investments through family offices based in Hong Kong. The scheme could initially be piloted in the Greater Bay Area before being expanded nationwide.
Highlighting infrastructure development, Mr. Lau emphasised the need to deliver key projects despite fiscal limitations. “To sustain Hong Kong’s competitiveness, we recommend broader use of public-private partnerships for infrastructure projects, which can reduce the government’s financial burden and associated risks.”
Supporting SMEs and Addressing Talent Shortages
Mr. Janssen Chan, co-chairperson of CPA Australia’s Taxation Committee for Greater China, stressed the importance of continued government support, as small and medium-sized enterprises (SMEs) have faced significant challenges in recent years. “We propose raising the threshold for the half-profits tax rate from HK$2 million to HK$3 million and offering a 100% tax rebate on the 2024/25 final profits tax, capped at HK$10,000.”
To combat talent shortages and support an ageing workforce, Mr. Chan recommended incentivising employers to hire older workers. “Providing an additional tax deduction for salaries paid to employees aged 60 and above, or offering direct wage subsidies, could encourage businesses to hire more senior workers.”
In line with the government’s “Study in Hong Kong” initiative, Mr. Chan proposed incentivising the conversion of industrial buildings into student accommodation and extending the Immigration Arrangements for Non-local Graduates (IANG) visa duration to four years for graduates pursuing further studies overseas.
Enhancing Living Standards and Supporting Families
Balancing fiscal responsibility with the needs of residents is essential. Mr. Adam Chiu, a member of CPA Australia’s Taxation Committee for Greater China, remarked, “While fiscal constraints may limit sweeteners this year, we recommend maintaining the 100% tax rebate on 2024/25 final salary tax, with a ceiling of HK$10,000. Additionally, salary tax allowances should at least be adjusted in line with inflation.”
To address Hong Kong’s ageing population and declining birth rate, Mr. Chiu proposed measures to alleviate the financial burden of raising children. “The government could introduce a childcare expense allowance of up to HK$60,000 and increase the child allowance to HK$150,000 per child, alongside expanding subsidies for childcare and early childhood education,” he suggested.
A Comprehensive Path Towards Economic Sustainability
CPA Australia’s proposals reflect a well-rounded approach to promoting sustainable economic growth while tackling the challenges Hong Kong faces. These measures aim to strengthen the city’s fiscal position, enhance its global competitiveness, and improve living standards for its residents.
