Ernst & Young expects fiscal surplus of $5b in HK for 2014-15

The surplus for 2014-15 fiscal year in Hong Kong is expected to be at 39 billion HK dollars ( about 5 billion U.S. dollars), higher than the originally budgeted surplus of 9.1 billion HK dollars.

This is mainly due to larger revenues from stamp duties and tax receipts, Ernst & Young (EY) said on Tuesday.

Based on EY's figures, the estimated surplus would raise Hong Kong's fiscal reserves to 794.7 billion HK dollars by the end of 31 March, 2015.

Agnes Chan, managing partner of Hong Kong and Macau at EY said when the Hong Kong Special Administrative Region government prepared the budget forecast in early 2014, it did not take into account the effects of the double stamp duty payable on certain instruments dealing with immovable properties, the relevant law only being enacted in July 2014.

Coupled with the robust performance of the property and stock markets in 2014, EY estimated that revenue receipts from stamp duties would reach a record level of 77.8 billion HK dollars.

In addition, tax revenues collected are expected to exceed the original forecast by 15 billion HK dollars owing to a steadily improving business environment and a nearly full employment labor market in Hong Kong, Chan said.

With recurrent fiscal surpluses recorded in the past decade, Hong Kong's fiscal reserves have swelled to an enviable level of almost 800 billion HK dollars.

While a portion of the fiscal reserves may be reserved to fund counter measures in the event of possible market volatility, EY proposed that certain relief measures should be introduced to alleviate the tax burdens of individuals and businesses which may still face tough economic times, in particular businesses hit by the recent students-led protest.

Furthermore, a portion of the fiscal reserves could be employed to enhance the competitiveness of the tax system and Hong Kong's ability to attract overseas investment, thereby facilitating the long-term economic development of Hong Kong and providing opportunities to individuals with aspirations, Chan said.