Hong Kong Budget 2021: Social welfare handouts cut, but HK$10k tax breaks and new loan scheme for the unemployed

Hong Kong’s finance chief on Wednesday announced a loan scheme for the unemployed and tax breaks of up to HK$10,000 to alleviate hardship in the wake of the Covid-19 pandemic, but social welfare handouts were reduced in the 2021-22 budget compared to the previous year.

Financial Secretary Paul Chan, announcing the measures at the legislature, said loans of up to HK$80,000 each would be available for around 245,000 Hongkongers who had lost their jobs due to the pandemic.

Coronavirus virus covid-19 mask — Photo: GovHK.

The loans will carry a fixed interest rate of one per cent but applicants would only have to repay the interest in the first year, with the principal repaid over up to the next five years. Those who repay the full amount on time will be reimbursed for the interest they paid.

All adult permanent residents will be offered HK$5,000 in consumption coupons in instalments, to be disbursed electronically, in an attempt to stimulate the economy.

The city’s unemployment rate hit 6.6 per cent in the last quarter of 2020, the highest in 16 years.

The budget, however, provided no other handouts to the unemployed while additional welfare payments were decreased. A total of HK$2.382 billion was allocated for extra welfare handouts compared with HK$4.225 billion in the 2020-21 budget.

“This prolonged economic downturn has plunged some people into financial difficulties. In view of this, many people have demanded temporary unemployment assistance,” Chan said in his address.

“The government has reiterated the policy considerations it has taken into account for not accepting the proposal,” he said, citing existing short-term help available under the government’s Comprehensive Social Security Assistance Scheme for the unemployed.

Chan also announced that HK$6.6 billion would be spent to create an additional 30,000 temporary jobs in both the private and public sector and lasting up to 12 months, through its anti-epidemic fund.

A one-off electricity bill subsidy of HK$1,000 will also be provided for residents.

Tax breaks

Salaries tax will be waived the coming year, capped at HK$10,000, a move which will benefit 1.87 million taxpayers and reduce revenue by HK$11.4 billion. This compares to HK$20,000 the previous year.

Handouts to the needy were also halved, with people receiving an extra half a month’s worth of welfare, old-age, and disability allowances instead of a month as before.

Chan also announced measures to support businesses totalling HK$9.5 billion.

Profit taxes would be capped at HK$10,000, benefiting 128 000 businesses and reducing government revenue by $1.05 billion. Business registration fees would also be waived, costing HK$3 billion.

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