Hong Kong's tax relief package recommended by EY

This file photo dated September 27, 2018 shows the logo of EY Ernst Young, a multinational professional services firm in Madrid. PHOTO AFP Global audit advisory firm Ernst and Young recommends a one-off financial relief package for individuals and businesses worth HK $32 billion $4.1 billion as a targeted measure to allocate government resources to those in need while maintaining a reasonable fiscal reserve level.

The government will grant an electricity charge subsidy of HK $1,000 for 2023 -- 24 to each residential electricity account and provide an extra half month of social security payments by reducing salaries tax and tax under assessment for 2022 -- 23 by 100 percent, capped at HK $10,000 for taxpayers with salaries tax charged at progressive rates, and lowering rates for one domestic residential property per person for 2023 -- 24.

EY recommends reducing profits tax for 2022 -- 23 by 100 percent, capped at HK $10,000 for companies with assessable profits below HK $2 million, waiving business registration fees for 2023 -- 24 and further extending the existing waivers or concessions of government fees and charges.

In this year s budget proposal, EY does not recommend that the Hong Kong Special Administrative Region government disburse consumption vouchers again to boost the economy.

While we are on the road to recovery, the government should be cautious about the uncertainties and fluctuations of the external environment in proposing supportive measures in the Budget 2023 -- 24, said Paul Ho, Hong Kong financial services tax leader at EY Tax Services.

READ MORE: HKSAR to dial down expansionary fiscal policy.

The impact of more government spending on the anticipated government budget deficit and the decrease in fiscal reserve have to be considered, Ho noted in the Thursday press conference.

EY estimates that the Hong Kong SAR will have a deficit of HK $135 billion in the financial year 2022 -- 23 compared to the government forecast of HK $56.3 billion. The reduction in government expenditure is offset by the decrease in land premium, stamp duty and profits tax and salaries tax receipts.

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By the end of March this year, Hong Kong's fiscal reserves will be reduced to HK $822.1 billion, equivalent to 12 months of estimated government expenditure, the lowest figure according to EY estimates.

As Hong Kong resumes normal travel with the mainland, the city's economic prospects will soon become clear this year. There will be more economic activities and we expect government revenues to rise for 2023 -- 24 years, Ho argued.