5 big must-knows for HK marketers from latest government budget

Hong Kong will roll out another round of consumer vouchers in April to stimulate the city's economy. It will also support SMBs in easing their operating pressures and safeguard jobs, according to Hong Kong's latest budget announcement.

Hong Kong's financial secretary Paul Chan said the COVID-19 pandemic has plagued the entire world for two years, taking a heavy toll on economic activities and people's way of life. In the upcoming financial year, he said the Hong Kong government will focus on four areas, including combating the pandemic; relieving the hardship of the people and SMEs; offering support to the struggling economy and fostering post-epidemic economic revival; and investing for the future by planning ahead for the medium- and long-term development of our economy.

He estimated that the counter-cyclical measures, costing a total of over HK$170 billion (US$21.8 billion), mentioned in the budget, together with the spending on infrastructure projects and other items, will have a fiscal stimulus effect of boosting the economy by around three percentage points.

Here are five key takeaways that businesses should focus on for Budget 2022-23:

1. Consumption vouchers

The Hong Kong government will implement a new round of the consumption voucher scheme, under which electronic consumption vouchers with a total value of HK$10,000 (US$1,281) will be disbursed by instalment to each eligible Hong Kong permanent resident and new arrival aged 18 or above through suitable stored value facilities. The scheme is expected to benefit about 6.6 million people.

The first batch of the consumption vouchers valued at HK$5,000 (US$640.7) will be disbursed in April to over 6.3 million successful registrants first by making use of the registration data collected through last year's consumption voucher scheme. They will get the remaining vouchers by instalments together with the new eligible persons in the middle of the year. Some media reports said the Hong Kong government had talked to eWallet operators in the city about the new round of consumption vouchers, and Bank of China (Hong Kong)'s BoC Pay was interested in joining AlipayHK, Octopus, Tap & Go and WeChat Pay HK to disburse the consumption vouchers.

2. New international tax standards

Chan said Hong Kong pledged to implement the international tax reform proposals drawn up by the OECD to address base erosion and profit shifting (BEPS 2.0). The government has been exchanging views with the affected MNEs on matters relating to the implementation of BEPS 2.0, and reaffirmed that the government would preserve the advantages of Hong Kong's tax regime in terms of its simplicity, certainty and transparency.

The government is planning to submit a legislative proposal to the LegCo in the second half of this year to implement the global minimum tax rate and other relevant requirements in accordance with the international consensus. At the same time, it will consider introducing a domestic minimum top‑up tax with regard toMNEs starting from the year of assessment 2024-25, ensuring that their effective tax rates reach the global minimum effective tax rate of 15%.

3. Supporting Enterprises, particularly SMBs

The government has extended the application period of all guarantee products under the SME Financing Guarantee Scheme (SFGS) for one year to the end of June next year. The Special 100% Loan Guarantee, under the SFGS, will also be further enhanced by increasing the maximum loan amount per enterprise from the total amount of employee wages and rents for 18 months to that for 27 months. The loan ceiling will be raised from HK$6 million to HK$9 million. The maximum repayment period will be extended from eight years to 10 years too.

Chan also requested the Hong Kong Monetary Authority (HKMA) to extend the pre‑approved Principal Payment Holiday Scheme through the Banking Sector SME Lending Coordination Mechanism for six months to the end of October this year. At the same time, the HKMA and the banking sector will offer enterprises the option of making partial repayment of principal over a longer period of time. This arrangement will also apply to the loans granted under the SFGS.

4. Supporting startups and technology investments

Hong Kong had about 4,000 startups last year. The amount of venture capital investment surged from HK$1.24 billion(US$159 million) in 2014 to about HK$41.7 billion (US$5.34 billion) in the same period.

Last year, the government appointed eight fund managers as general partners to make strategic investment. To nurture enterprises that are relatively more mature and have good potential for contribution to our economy, the government will further increase the funding allocated to the Hong Kong Growth Portfolio under the Future Fund by HK$10 billion (US$1.28 billion), of which HK$5 billion (US$640.68 million) will be used to set up a new investment fund, namely the Strategic Tech Fund. It will invite the Hong Kong Science and Technology Parks Corporation and the Cyberport to identify technology enterprises which are of strategic value to Hong Kong as well as investment opportunities conducive to enriching the I&T ecosystem.

Also, to help universities realise their R&D outcomes, the government will double the amount of subsidy to HK$16 million (US$2.05 million) to every university. The increased subsidy will be provided to start‑ups of universities with private investments on a matching basis of one-to-one. Each start‑up may receive an annual subsidy of up to HK$1.5 million (US$192,202) for a maximum of three years.

5. Tourism

The government will spend HK$1.26 billion (US$161.45 million) to support and develop the tourism industry, of which $600 million (US$76.88 million) will be used to implement the "Cultural and Heritage Sites Local Tour Incentive Scheme". The scheme aims at providing incentives for the industry to develop and launch tourism products with cultural and heritage elements as well as supporting the operation of the Green Lifestyle Local Tour Incentive Scheme. Another sum of $60 million will be used to sponsor the training of tourism practitioners for three years, with a view to further improving the professional standards and service quality of the industry.

Lastly, to consolidate Hong Kong's role as a centre for international arts and cultural exchange, the government will allocate HK$42 million (US$ 5.38 million) for organising the first Hong Kong Performing Arts Market within two years. The large‑scale arts market, which is designed for the performing arts industry, will serve as an integrated platform for showcasing the works of top‑notch performing artists and arts groups from China, Hong Kong and overseas.