Budget Speech by the Financial Secretary (11)
Revised Estimates for 2025-26
270. The 2025-26 revised estimate of total government revenue is about $688.8 billion, higher than the original estimate by 4.5 per cent.
271. Due to a buoyant equity market and an accelerated economic growth, the revenue estimate from stamp duties is revised to $99.5 billion, an increase of about $31.9 billion from the original estimate. Revenue from profits tax has increased by about $16.8 billion while that from salaries tax remains stable, with the revised estimates at $209 billion and $97 billion respectively, demonstrating the strong resilience of Hong Kong's economy. However, as the residential property market has just stabilised while the commercial property market remains relatively sluggish, government revenue from land premium stays low with the revised estimate at $17.5 billion, lower than the original estimate by $3.5 billion.
272. The revised estimate of total government expenditure for 2025-26 is $789.2 billion, lower than the original estimate by $33.1 billion. Of this, recurrent expenditure is $572.4 billion, lower than the original estimate by $15.7 billion.
273. The Operating Account for 2025-26, which was originally estimated to record a deficit of about $3 billion, will register a surplus of $51.3 billion. The Capital Account will record a deficit due to low revenue from land premium, coupled with high capital works expenditure to cater for the accelerated development of the NM and other public works projects relating to the economy and people's livelihood. Taking into account the issuance of government bonds of $155 billion and repayments of $51.7 billion, it is expected that the Consolidated Account will register a surplus of $2.9 billion instead of a deficit of about $67 billion as originally estimated. Fiscal reserves are expected to be $657.2 billion by March31, 2026.
Estimates for 2026-27
274. The major policy initiatives announced in last year's Policy Address involve $7.4 billion in operating expenditure, $32 billion in capital expenditure and $20 billion in financial commitments. Besides, there will be about $1.3 billion in revenue forgone. The financial implications of such initiatives have been reflected in the estimates for 2026-27.
275. Total government expenditure for 2026-27 will increase by about 6.9 per cent to $843.4 billion, with its ratio to nominal GDP projected to be 24.2 per cent.
276. Recurrent expenditure for 2026-27 will increase by 4.8 per cent to $599.7 billion. Of this, substantial resources will continue to be allocated to livelihood-related policy areas including healthcare, social welfare and education, involving a total of $357.1 billion and representing about 60 per cent of recurrent expenditure. Non-recurrent expenditure will increase by 36.9 per cent to $40.5 billion.
277. Total government revenue for 2026-27 is estimated to be $765.2 billion, while earnings and profits tax are estimated to be $321.2 billion, increasing by $2.2 billion over the revised estimate for 2025-26. On the basis of the Land Sale Programme and the land supply target for 2026-27, revenue from land premium is estimated to be $18 billion, increasing by $0.5 billion over the revised estimate for 2025-26. Revenue from stamp duties is estimated to be about $101 billion, increasing by 1.5 per cent over the revised estimate for 2025 26. Besides, we will bring back about $15.8 billion from funds established outside the Government's accounts, and transfer $37 billion and $75 billion respectively from the surplus of the Bond Fund and the investment income of the Exchange Fund to the Government's accounts.
278. The Operating Account for 2026-27 is estimated to register a surplus of about $11.9 billion, while the Capital Account is estimated to record a deficit of about $90.1 billion. Taking into account the bond issuance of about $160 billion and repayments of about $59.7 billion in 2026-27, a consolidated surplus of $22.1 billion is expected for the year, and the fiscal reserves will rise to $679.3 billion.
Supporting People and Enterprises
279. To relieve the economic pressure faced by the people and enterprises, we will, having regard to the Government's fiscal position this year, introduce the following measures:
(a) provide rates concession for domestic properties for the first two quarters of 2026/27, subject to a ceiling of $500 for each rateable property. This measure is estimated to involve about 3.15 million domestic properties and reduce government revenue by about $3.1 billion;
(b) provide rates concession for non-domestic properties for the first two quarters of 2026/27, subject to a ceiling of $500 for each rateable property. This measure is estimated to involve about 440 000 non-domestic properties and reduce government revenue by about $400 million;
(c) reduce salaries tax and tax under personal assessment for the year of assessment 2025/26 by 100 per cent, subject to a ceiling of $3,000. The reduction will be reflected in the final tax payable for the year of assessment 2025/26. This measure will benefit about 2.12 million taxpayers and reduce government revenue by about $5.3 billion;
(d) reduce profits tax for the year of assessment 2025/26 by 100 per cent, subject to a ceiling of $3,000. The reduction will be reflected in the final tax payable for the year of assessment 2025/26. This measure will benefit about 171 000 businesses and reduce government revenue by about $500 million; and
(e) provide an allowance for eligible social security recipients, equal to one month of the standard rate CSSA payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance, while similar arrangements will also apply to recipients of the Working Family Allowance, altogether involving an additional expenditure of about $6.5 billion.
280. Besides, starting from the year of assessment 2026/27, I propose:
(a) increasing the basic allowance and single parent allowance from $132,000 to $145,000, and the married person's allowance from $264,000 to $290,000. This measure will benefit about 2.09 million taxpayers and reduce tax revenue by about $3.56 billion a year;
(b) increasing the child allowance and additional child allowance from $130,000 to $140,000. This measure will benefit about 360 000 taxpayers and reduce tax revenue by about $680 million a year; and
(c) increasing the allowance for maintaining a dependent parent or grandparent and raising the deduction ceiling for elderly residential care expenses. These measures will benefit about 830 000 taxpayers and reduce tax revenue by about $970 million a year. I will make the following three adjustments:
- increasing the allowance for maintaining a dependent parent or grandparent aged 60 or above from $50,000 to $55,000. The same increase applies to the additional allowance for taxpayers residing with these parents or grandparents;
- increasing the allowance for maintaining a dependent parent or grandparent aged 55 to 59 from $25,000 to $27,500. The same increase applies to the additional allowance for taxpayers residing with these parents or grandparents; and
- raising the deduction ceiling for elderly residential care expenses from $100,000 to $110,000 for taxpayers whose parents or grandparents are admitted to eligible residential care homes.
Medium Range Forecast
281. The MRF projects the revenue and expenditure as well as fiscal position of the Government from a macro perspective. It has fully reflected the impact of the measures in the fiscal consolidation programme. From 2026-27 to 2030-31, a real economic growth rate of three per cent is adopted.
282. During the above period, the average annual capital works expenditure will be about $120 billion, while recurrent government expenditure will grow at a rate of 3.6 per cent per annum. The ratio of total government expenditure to GDP will gradually fall from about 24.2 per cent for 2026-27 to about 21.5 per cent for 2030-31.
283. As regards revenue, the growth rates of revenue from profits tax, salaries tax and stamp duties are expected to correspond to the economic growth rates in the next few years. For 2027-28 onwards, revenue from land premium is estimated to progressively rise to two per cent of GDP, which is a conservative level lower than the average of 3.2 per cent over the past 20 years. Overall, the ratio of government revenue to GDP will maintain at about 20 per cent.
284. In addition, the MRF reflects the proceeds from the annual issuance of government sustainable bonds and infrastructure bonds worth about $160 billion to $220 billion in total. After deducting bond repayments, the net proceeds from bond issuance each year range from $57 billion to $117 billion.
285. Based on the above projections, there will be a surplus in the Operating Account for each of the next five years, while the Capital Account will still record a deficit due to expenditure on infrastructure. After taking account of net proceeds from the issuance of bonds, the Consolidated Account will register a surplus in each of the next five years. The above forecast has not taken into account any tax concessions or relief measures that the Government may implement after 2027-28.
286. Fiscal reserves are estimated at $733.7 billion by the end of March 2031, representing 17.3 per cent of GDP, or equivalent to about 10 months of government expenditure.
Concluding Remarks
287. President, over the past year, the global environment has remained volatile, and Hong Kong has continued to undergo economic transformation, with some sectors still facing pressure. Technological innovation, in particular the development of AI, has brought us a mix of opportunities and challenges. Yet, Hong Kong has always thrived amid changes and progressed through innovation, demonstrating strong determination and resilience, as well as exceptional agility and adaptability. While transformation is ongoing, our economy has recalibrated its course and is advancing steadily.
288. Characterised by its cultural blend of East and West, the robust rule of law, a simple and low tax regime, as well as a safe and liveable environment, Hong Kong is well placed to attract talents, enterprises and capital. We must make full use of our strengths and leverage the resolute support of our country to speed up and scale up our economic development sustainably for creating better development opportunities for the people and enhancing their quality of life.
289. The colour of the cover of this year's Budget is purple. Representing elegance and charm, the colour also stands for calmness and perseverance, signifying the growing intrinsic strengths of Hong Kong's economy in the midst of a fast-changing external environment, as well as people's aspirations for happiness.
290. Next year marks the 30th anniversary of Hong Kong's return to the Motherland. Let us gallop towards a brighter future with confidence and determination. By making the most of our strengths under the "one country, two systems" framework, we will certainly enrich and enliven our city through more diverse and inclusive development for the better livelihood of our citizens and to make greater contributions towards Chinese modernisation.
291. Thank you.
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