Response to the 2025-26 Fiscal Budget
Release Date: 2025-02-26
Response to the 2025-26 Fiscal Budget
The Hong Kong Securities and Futures Professionals Association (hereinafter referred to as "the Association") extends its full support to the 2025-26 fiscal budget announced by the Financial Secretary, Mr. Paul Chan Mo-po, on February 26. The Association commends the budget's initiatives aimed at reinforcing Hong Kong's status as a global financial hub, advancing capital market reforms, enhancing market liquidity, and fostering financial innovation. Nonetheless, the Association urges the government to further refine relevant policies, especially in broadening the tax base, optimizing trading mechanisms, and promoting financial market innovation to bolster the long-term competitiveness of Hong Kong's financial markets.
Concerns Regarding Social Welfare Reductions
The Association is deeply troubled by the government's decision to reduce social welfare expenditures without corresponding adjustments to civil service salaries. This decision not only adversely impacts vulnerable societal groups but may also heighten social inequality and erode public trust in the government. The Association advocates for addressing fiscal challenges by optimizing internal resource allocation and controlling expenditures, rather than transferring the burden onto the public. Such measures could undermine social stability and potentially hinder economic recovery. The government should carefully evaluate the impact of various policies on different social strata to ensure the fairness and sustainability of fiscal measures.
Recognition of Innovative Measures in the Fiscal Budget
The Association acknowledges and supports the government's efforts in promoting digital finance and green finance, which are poised to deliver new growth opportunities and competitive advantages to Hong Kong's financial markets. The government's initiatives to enhance fintech and digital payment infrastructure are expected to attract more international capital and technological innovation, thereby improving market transparency and efficiency.
Expanding the Tax Base and Diversifying Fiscal Revenue
The Association notes the ongoing decline in Hong Kong's fiscal reserves and the increasingly acute structural fiscal deficit issue. To ensure fiscal sustainability, the government should consider the following measures:
1. Optimize the existing tax system: Reduce dependency on land revenue and stamp duty on stocks by exploring more stable income sources.
2. Explore new revenue streams: Consider introducing a goods and service tax to establish a healthier and more balanced fiscal revenue structure.
3. Review the civil service salary mechanism: Ensure the rational allocation of fiscal resources and enhance fiscal transparency and efficiency.
Adjustment of Stock Trading Stamp Duty and Market Reforms
The Association regrets the absence of any mention of reducing the stock trading stamp duty in the budget and proposes the following recommendations:
1. Lower the stock trading stamp duty: Reduce the current 0.1% paid by both buyers and sellers to 0.0625% to enhance market competitiveness.
2. Reintroduce derivatives stamp duty: Implement reasonable taxes on products like warrants and callable bull/bear contracts to ensure market fairness.
3. Long-term goal: Gradually abolish stock trading stamp duty to bolster Hong Kong's market international appeal.
4. Adjust listing thresholds: Optimize rules for dual primary and secondary listings to attract more international investors and companies to Hong Kong.
Deepening Capital Market Development and Connectivity Mechanism
The Association supports the government's proposed capital market reforms and further suggests:
1. Optimize listing rules: Lower the minimum market capitalization threshold for companies meeting profitability requirements to invigorate the IPO market.
2. Relax regulations on asset injections for listed companies: Facilitate mergers, acquisitions, and restructuring activities to enhance market liquidity.
3. Strengthen connectivity with Mainland markets: Expand the scope of the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect to further boost market trading volume.
4. Accelerate the implementation of T+1 settlement cycle: Improve the trading unit system and reform the listing system to ensure more efficient market operations.
Fintech and Innovation Development
The Association supports the government's initiatives to promote digital bond issuance, tokenization technology applications, and virtual asset market regulation, and recommends:
1. Accelerate the development of a "digital Hong Kong dollar": Promote widespread digital currency adoption to enhance payment system efficiency.
2. Offer tax incentives and subsidies: Attract international fintech companies to establish regional headquarters in Hong Kong to drive industry development.
3. Encourage collaboration between traditional financial institutions and tech companies: Enhance the application of regulatory technology (RegTech) to improve market regulatory effectiveness.
Supporting SME Development
The Association acknowledges the government's proposals to enhance SME financing and suggests further strengthening cooperation with chambers of commerce to provide more policy support and financial assistance. SMEs are a vital component of Hong Kong's economy, and their robust development is crucial for economic recovery and growth. The Association recommends the government consider providing more tax incentives and financing conveniences to support SME innovation and development.
Promoting Islamic Finance Development
The fiscal budget mentions efforts by the Hong Kong Stock Exchange to bolster its promotional activities in ASEAN and the Middle East but lacks specific measures for the development of Islamic finance. The Association recommends that the government implement specific policies, such as offering relevant education and support measures, to attract more Islamic financial institutions and capital to Hong Kong.
Additional Recommendations
The Association welcomes the government's increased support for the asset management industry and suggests further optimizing tax incentives for funds and family offices to attract more international asset management institutions to Hong Kong.
The Association believes that implementing the above recommendations will help further consolidate Hong Kong's position as a leading international financial center and promote continuous innovation and development in the financial market. The Association looks forward to the government actively considering and adopting these recommendations in future policy-making to foster the long-term prosperity and global competitiveness of Hong Kong's financial market. The Association will continue to collaborate closely with the government and the industry to contribute to Hong Kong's economic development and financial stability.
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association