It is only natural that the multi-billion-dollar Northern Metropolis (NM) development should anchor Hong Kong’s first Five-Year Plan. After all, the NM will be able to house 2.5 million people and create some 650,000 jobs in 2036. It is a key component in Hong Kong’s future.
The NM blueprint maps out the development of one third of Hong Kong’s land mass for the next eight years and can easily be dovetailed in the Five-Year Plan as well as being integrated into the mainland’s 15th Five-Year Plan.
The NM is moving at an ever-accelerating pace with more than 60 firms having moved into the first two buildings in the Phase 1 development of the San Tin Technopole, the centrepiece of the entire project. The infrastructure is already well in place: drainage has been laid, internal roads built with slip roads connecting to the main highway, electricity has been connected and buildings are sprouting like stalagmites while construction cranes dot the skyline. The area is a hive of activity.
Earlier this week, the government opened the two-month consultation period for the public to comment on how Hong Kong should look in the next five years. It is strategic, forward-looking, and operable. Its purpose is to strengthen Hong Kong’s position as an international financial, maritime, and trade centre. The road map will also help drive growth for the Guangdong-Hong Kong-Macao Greater Bay Area. Livelihood issues such as healthcare, education, housing, social welfare, elderly care, etc. will also be covered in the Five-Year Plan.
The Plan is another tool to complement Hong Kong’s annual budget and the chief executive’s policy address. The annual policy address and budget would serve to advance the goals and visions of the plan, which aim to align with Beijing’s blueprint guiding the country’s development from 2026 to 2030.
The Government strives to publish the formal document of Hong Kong's Five-Year Plan within the third quarter of the year.
The overview of the document is divided into six sections, containing 95 bullet points outlining initiatives under 29 policy directions and key proposals:
The first part covers the NM, collecting views on policy tools and areas in which Hong Kong holds the greatest strengths. It sets a target of delivering more than 70,000 flats and 1 million square metres of floor space for economic activities over the next five years. To achieve this, the government is proposing several models to stimulate market interest, including “large-scale land disposal”, establishing an “industry park company,” and a “pay for what you build” scheme.
The second section sets out directions such as building an “internationally competitive low-altitude economy ecosystem” and a “commodities trading ecosystem” to expand cross-boundary financing for mainland enterprises.
The third part outlines plans to deepen AI+ initiatives and transform the city into a health and medical innovation hub.
For livelihood issues, the fourth section includes a commitment to “eradicate substandard subdivided units in an orderly manner” through the new “basic housing unit” regime. It also focuses on addressing the pressures of an ageing society and changes in labour supply.
The fifth and six sections cover areas of regional cooperation, the integrated development of culture, sports and tourism, and green living.
Chief Executive John Lee has noted that the Five-Year Plan aims to strengthen Hong Kong’s core sectors—including finance, shipping, trade, and technology—while accelerating projects such as the international aviation hub, a talent hub, and the Northern Metropolis development.
Leveraging the city's unique strength, Lee said Hong Kong will serve as a bridge connecting the mainland and the world, driving high-quality development and allowing citizens to benefit from the city’s growth.
The plan will help Hong Kong seize more strategic opportunities, allowing the city to further strengthen the integration of the Greater Bay Area through regional cooperation, transforming Hong Kong from a traditional "super-connector" into a "functional value-added hub" for the country.'
Mark Pinkstone
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The continued success of Hong Kong over the years can be attributed to one fact: it’s low and simple tax system. It has always been a major selling point to woo expatriate experts to Hong Kong to drive its financial and other services to be competitive with world markets.
US doomsday prophet Stephen Roach was quick to point out that thousands left Hong Kong during the COVID pandemic in 2020. But he has failed to mention the thousands that have returned since that dark period, which, according to US financial media giant Bloomberg, are responding to a booming initial public offering market, planned tax breaks for private equity and hedge funds, and a more vibrant city.
Bloomberg provided its financial clients worldwide with an in-depth feature on Hong Kong as it is today. Titled “Finance Expats Flock Back to Hong Kong Seeking Low Taxes, Better Jobs”, the 2,500-word article cited expatriates who had left and returned saying that although the cost of living in Hong Kong was relatively high, the tax relief outweighed these costs.
Hong Kong’s tax is simple. It is divided into three categories – individual, business and property owners. For individuals the standard tax rate is 15 per cent, for businesses, a two-tiered profits tax applies – 8.25 per cent of the first HK$2 million and 16.5 per cent thereafter – and property tax is 15 per cent of net assessable value. There is also an ad valorem stamp duty on property transactions ranging from $100 on property under $4 million to 4.25 per cent on property exceeding $27.39 million. Transactions exceeding $100 million hit a rate of 6.5 per cent duty.
There is no sales tax (save for tobacco and alcohol), VAT, withholding tax, capital gains tax, estate tax or dividend tax. The global average for sales tax is 13.7 per cent and the Asian average is 9.6 per cent.
Bloomberg noted that there were 31,278 employment visa approvals last year, more than double the number five years ago, with many going to nationals from Japan, South Korea and the UK. In financial services, some 2,343 visas issued to foreigners rose by 17 per cent last year to the highest since 2022.
While the sustainability of the influx may hinge on the strength of the IPO market, global financial firms including Bank of America and HSBC Holdings are among those signalling confidence in Hong Kong. Many new high-rise office blocks which saw low occupancy rates a few years ago are now reporting almost full capacity, another indicator of confidence in the business sector. Bloomberg said Hong Kong is aggressively promoting the city’s low taxes and comparative lack of red tape to the world’s ultra-rich business owners and money managers.
Hong Kong and Singapore rank third and fourth behind New York and London in the latest Global Financial Centres Index. Singapore’s tax rate is similar to Hong Kong (15 per cent for eexpatriates,4 per cent for director’s fees, and 17 per cent flat rate for corporations). A number of individuals and corporations fled to Singapore during the pandemic, but with Hong Kong fast becoming the financial hub of Asia, many are now returning, causing the Singapore Monetary Authority to entice investment firms to stay by cutting their taxes.
With neighbouring countries upping their incentives to woo the investment firms and experts, Hong Kong is keeping ahead of its competitors by eliminating the tax on hedge fund profits and plans to promote the development of Corporate Treasury Centres (CTCs). The tiered tax regime proposed is precisely designed to address the main points of the industry in a targeted manner, providing eligible corporations with more comprehensive tax benefits, greater tax certainty, and enhanced compliance flexibility. The government will also revamp the existing tax concession regime applicable to corporate treasury activities and introduce a more competitive tiered system. These measures include refining the existing concession regime and introducing a pre-approval mechanism. Pre-approved CTCs and their pre-approved associated companies will enjoy more favourable tax benefits, greater tax certainty and enhanced compliance flexibility.
These innovative, pragmatic, and competitive measures are expected to attract more multinational corporations from different regions and sectors to make full use of Hong Kong's role as a platform with the new catch phrase of 'bringing in and going global', and to bring their funds and core business to Hong Kong for centralized management, thereby strengthening Hong Kong's position as a major base for CTCs.
In June the government announced that with immediate effect, tax on the profits of hedge funds would be eliminated. By removing taxes on performance income, which are typically levied on profits generated from investment strategies, the city aims to create a more attractive environment for hedge fund operations. By eliminating the tax burden on performance income, Hong Kong is positioning itself as a favourable jurisdiction for hedge funds seeking to maximize their profitability. Industry experts predict that this policy change could lead to an influx of hedge funds relocating to Hong Kong, as fund managers look for jurisdictions that offer more favourable tax regimes.
Hong Kong’s long-standing policy of a low tax regime has been the magnet to draw the best of the best to its shores and invest in its future as a leading global financial centre.
