HK’s finances still in great shape: tax expert

A tax expert has played down concerns about the long-term outlook for Hong Kong’s public finances, saying healthy reserves mean the books are still in great shape despite a warning of five years of deficits to come.

Financial Secretary Paul Chan said in his budget on Wednesday that the deficit would hit HK$257.6 billion this year, but speaking on RTHK’s Hong Kong Today programme, KPMG’s John Timpany said he expected the public finances to bounce back quickly as the pandemic came under control.

“Hong Kong public finances are still in a very strong position,” he told RTHK’s Mike Weeks on Thursday. “Even at the end of the forecast period, you’re still talking about HK$750 billion in reserves.

“The government’s balance sheet remains very, very strong despite these deficits,” said Timpany, head of tax in Hong Kong for KPMG China.

In his speech on Wednesday, Chan predicted that the SAR’s economy would return to growth this year after a recession stretching back to 2019 amid social unrest, Sino-US tensions and the pandemic.

Chan said he expected the deficit for the financial year to the end of next month to reduce the SAR’s reserves to HK$902.7 billion.

He expects counter-cyclical measures intended to boost the economy to push the deficit to more than HK$100 million next year, with deficits of between HK$22.4 billion to HK$40.7 billion in the following four years.

He said the government would rein in spending by freezing new hires in the civil service and implementing an “expenditure reduction programme” by requiring all policy bureaux and departments to cut down on expenses.

Before last year, Hong Kong had recorded surpluses for more than a decade, partly driven by healthy land revenues.