PricewaterhouseCoopers: Expects Hong Kong government's fiscal reserves to decrease to HK$639.8 billion by the end of March.

According to the latest estimation by PwC, the Hong Kong government's land sale revenue for the current fiscal year is expected to be around 8 billion Hong Kong dollars, 76% lower than the government's original estimate of 33 billion Hong Kong dollars. Stamp duty is expected to generate revenue of 58 billion Hong Kong dollars, 18% lower than the original estimate of 71 billion Hong Kong dollars. Profits tax and salaries tax revenue will reach 78 billion Hong Kong dollars, a decrease of 10% from the original estimate of 275.6 billion Hong Kong dollars. PwC estimates that by March 31, 2025, the financial reserves of the Hong Kong government will decrease to 3.98 billion Hong Kong dollars, equivalent to about 10 months of government expenditure. This is the lowest level of financial reserves in the history of the Hong Kong SAR government, with the highest level being 28 months. PwC states that if government expenditure continues to grow at the current rate without taking measures to reverse this trend, the Hong Kong government is expected to face deficits in the next four fiscal years. To address and alleviate this challenging financial situation, the Hong Kong SAR government should prioritize a comprehensive review of public expenditure in the coming years and strengthen efforts to control expenditure growth. At the same time, a careful balance must be struck between managing finances and their impact on the public. PwC's Southern China and Hong Kong Tax Leader Winnie Ni said that with geopolitical tensions, slowing interest rate cuts, and other factors that may hinder rapid economic recovery, the global economy is expected to face more uncertainties in 2025, which may also impede Hong Kong's economic recovery. PwC predicts that the Hong Kong SAR government will record a fiscal deficit of 94.8 billion Hong Kong dollars, including a net cash inflow of 95.8 billion Hong Kong dollars from government bonds. This estimated fiscal deficit is nearly twice the Hong Kong government's original estimate. Hong Kong should now make good use of its strategic position in the Greater Bay Area and act as a super connector between mainland China and the rest of the world, supporting innovation in Shenzhen's new industries and retaining talent to drive Hong Kong's future development. In line with the measures taken by the Hong Kong government to attract skilled labor, PwC's Southern China Private Clients and Family Enterprises Tax Leader Alan Wong suggested that creating a friendly environment for international talent is crucial. The Hong Kong government could consider establishing a comprehensive one-stop convenience service, including streamlining visa application processes, matching talent with suitable job opportunities, and arranging education facilities for their children to ensure smooth transition and integration into Hong Kong. In addition, the Hong Kong government should optimize tax laws to provide more favorable unilateral tax relief for individuals who have already paid taxes in other tax treaty jurisdictions. In addition to attracting international talent, meeting the needs of local talent is equally important. Alan Wong suggests providing tax deductions for employers to encourage them to invest in improving employee skills and providing retraining for their employees. This will enhance the skills of local labor in Hong Kong, ensuring that they can keep up with the rapidly changing business environment. To develop Hong Kong into a leading hub for family offices, PwC recommends accelerating the implementation of optimization measures for tax relief for single-family offices. Alan Wong stated that expanding the specified asset categories eligible for tax relief, including art and collectibles, can meet the unique needs of family offices. Given that both the New Capital Investor Immigration Scheme and the tax relief for family offices aim to attract asset owners to settle in Hong Kong and explore diversified investment opportunities, aligning the list of eligible investments under these two measures will help individuals interested in setting up family offices and settling in Hong Kong make investment decisions. To further strengthen the ecosystem and industry of Hong Kong family offices, Alan Wong suggested that the Hong Kong government introduce other measures to complement tax relief, such as expediting the process for key members of qualified family offices and their immediate family members to obtain Hong Kong residency, simplifying work visas for foreign investment professionals, and providing tax incentives for qualified family offices, such as preferential tax rates. PwC's Asia Pacific Financial Services Tax Leader Raymond Ho proposed that to consolidate Hong Kong's position as a leading international financial center, the Hong Kong government should expedite the optimization of tax relief for investment funds and associated equities. The Hong Kong government should also consider exempting stamp duty on stock transactions to stimulate capital market activities and attract more investors. Providing stamp duty exemptions for market intermediaries will further promote smoother and more cost-effective transactions, thereby enhancing overall market efficiency and liquidity.