Tax breaks and R&D touted to keep Hong Kong competitive as Carrie Lam delivers policy speech

Government will also develop new convention venues but scrap unpopular plan to raze Wan Chai Sports Ground

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The skyline of Central district in Hong Kong. Photo: AFP

Published: 9:03pm, 11 Oct 2017Updated: 6:33pm, 12 Oct 2017

Lower taxes on profits, tax deductions for businesses that invest in research and development (R&D) and the expansion of conference space in a prime area of Hong Kong were announced by the city’s leader on Wednesday, as she seeks to diversify the economy and draw more investors from abroad.

In announcing these measures in her maiden policy address on Wednesday, Chief Executive Carrie Lam Cheng Yuet-ngor offered an optimistic view on the city’s growth, saying that she expected it to be higher than 3.5 per cent. An earlier forecast estimated that growth would be between 3 and 4 per cent. Average growth in the past decade has been 2.9 per cent.

Pedestrians in Hong Kong’s Central district, which is the city’s political, administrative and financial hub. Photo: Alamy

Lam went beyond her election promises by delivering tax benefits that were more generous than expected.

“We should strategically utilise our tax measures to enhance Hong Kong’s competitiveness by promoting the development of our industries and economic diversification,” said Lam, noting that Hong Kong was facing “increasingly grave challenges” from global competition and the rise of protectionism.

Companies will soon pay tax of 8.25 per cent on the first HK$2 million of profits, down from the existing flat rate of 16.5 per cent. Profits above HK$2 million will still be subject to the 16.5 per cent tax rate. Lam had initially suggested reducing the figure to 10 per cent when she was running for election earlier this year.