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HONG KONG (AP) — Hong Kong's Chief Executive, John Lee, has unveiled a series of tax cuts, including a halving of extra stamp duties for non-resident homebuyers and current local homeowners seeking additional properties. The move, announced in Lee’s annual policy address Wednesday, is aimed at bolstering the city's financial markets and reinforcing its reputation as a global financial hub, reports say.
Additionally, stamp duty on stock transactions will be reduced from 0.13% to 0.1%. These measures mark the first easing of property cooling measures in a decade and underscore the importance of a robust stock market in maintaining the city's status as a financial powerhouse, a report of the Associated Press said.
Following the gradual easing of COVID-19 restrictions, Hong Kong's economy has shown signs of recovery, driven by growth in tourism and increased private consumption. The city's economy expanded by 2.2% year-on-year in the first half of 2023, and experts project a full-year growth rate of between 4% and 5%, according to the news agency. Nevertheless, the path to a complete economic recovery remains uncertain, particularly in light of escalating geopolitical tensions and mainland China's struggle to rebound swiftly as Hong Kong's largest trading partner.
In a bid to stimulate economic growth and maintain Hong Kong's position as a global financial center, Chief Executive John Lee announced a series of tax cuts in his annual policy address on Wednesday. The most notable among these measures is the halving of extra stamp duties imposed on non-resident homebuyers and local homeowners looking to purchase additional properties. This significant move represents the first easing of property cooling measures in Hong Kong in the past decade.
Furthermore, Lee also addressed the importance of a vibrant stock market to the city's economic well-being. To this end, he announced a reduction in stamp duty on stock transactions from 0.13% to 0.1%. This adjustment is intended to promote active trading and investment in the stock market, which plays a pivotal role in upholding Hong Kong's status as a leading global financial hub.
The tax cuts come at a time when Hong Kong's economy is showing signs of recovery, driven primarily by growth in tourism and increased private consumption as COVID-19 restrictions are gradually lifted. The city's economy expanded by 2.2% year-on-year in the first half of 2023, and experts anticipate that it will continue to grow, with projections ranging from 4% to 5% for the full year. However, the journey towards complete economic recovery remains uncertain.
One significant factor contributing to this uncertainty is the escalating geopolitical tensions in the region. Hong Kong finds itself caught in the crossfire, with concerns over its political and economic autonomy remaining at the forefront. Additionally, the city's reliance on mainland China, its largest trading partner, makes it vulnerable to the economic challenges that China faces as it strives to recover from the pandemic's impact.
As Hong Kong navigates these challenges, Chief Executive John Lee's tax cuts represent a proactive effort to bolster the city's financial markets, attract investment, and ensure its continued prominence as a global financial hub. The success of these measures will play a crucial role in shaping Hong Kong's economic trajectory in the coming months and years.
The AP report adds:
The financial hub has been wrestling with the mass departure of residents in recent years, triggered by a crackdown on pro-democracy activists following Beijing's imposition of a tough national security law, and the now-rescinded strict COVID-19 mandates. This mass migration has hurt its economy and the property market.
Official data showed that a 15% year-on-year drop in home prices last December, and a 39% yearly decline in the volume of residential property transactions in 2022.
Lee acknowledged the decline in transactions and property prices over the past year amid interest rate hikes and modest economic growth in other regions, and adjusted a raft of measures that manage property demand with immediate effect.
Under the slashed stamp duty, a foreigner buying properties in the city only needs to pay 15% of their purchase price as taxes, down from 30% currently. Current local homeowners will pay 7.5% for buying their second homes, down from 15%.
Foreign professionals working in Hong Kong on eligible visa programs are no longer required to pay extra property stamp duties arising from their non-permanent residency unless they fail to become permanent residents later.
A former security chief handpicked by Beijing to lead Hong Kong, Lee also is aiming to enact the city's own security law next year. Similar efforts were shelved in 2003 after fears about losing freedoms sparked massive protests.
Beijing has already imposed a national security law on the former British colony that returned to its rule in 1997. It criminalizes acts of secession, subversion, terrorism and collusion with foreign forces. But the city's constitution requires Hong Kong, a semi-autonomous territory, to enact its own laws for acts such as treason, secession and subversion.
“External forces continue to meddle in Hong Kong affairs,” Lee said, without elaborating.
He added the government will propose a bill to enhance cybersecurity of the critical infrastructure, such as financial institutions and telecommunications.