Budget 2024: Two‑tiered standard rates regime and decreased reduction of salaries tax

The salaries of taxpayers earning $5 million dollars or more a year will be split into two salary tax bands starting from 2024/25, Financial Secretary, Paul Chan Mau-po proposed in today’s budget speech.

Their first HK$5 million will be subject to the standard rate of 15 % and any amount exceeding that will be taxed at 16%.

“It is expected that the revenue of the Hong Kong Government will increase by about HK$910 million a year as a result,” Chan said.

Mak Sui-choi, associate professor of the Department of Accountancy, Economics and Finance of Hong Kong Baptist University said the measure proposed is to aid the government’s financial difficulties.

“The two-tiered standard rates regime will not affect the daily life of wealthy people and they account for only around 0.06% of Hong Kong’s population, which will not affect foreign talents to come and work in Hong Kong, ” Mak said.

Au Yeung Tat-chor, assistant professor of sociology at Lingnan University said although it makes sense in terms of fiscal fairness to collect more taxes from those with higher annual salaries, it is not a long-term solution for the government to rely on this tax for the bulk of its revenue.

“The best solution is to fundamentally change the local salary and income structure, rather than relying on such a policy,” he said.

Meanwhile, Chan announced the reduction of salaries tax and tax under personal assessment for the year of assessment 2023-24 by 100%, subject to a ceiling of $3,000. That will benefit about 2.06 million taxpayers. 

In his speech, Chan mentioned that the basic allowance for children and newborns will remain unchanged at $130,000, unchanged from last year.

Chan said that the government had taken into account the economic pressure still faced by some industries and the public, as well as the government's financial situation this year. The opinion of the public on the measures for salary tax reduction varies after such measures are implemented.

Wong Gwai-jing, 49, a construction worker,  is satisfied with the reduction.

"The reduction of the salary tax of HK$3,000 is already helpful to me, and it takes some of the burden off of my family,” Wong said.

Wu Hoi-yum, a worker at a snack shop, 45, said the financial burden of being a wage earner is so heavy that the government's $3,000 payroll tax deduction seems insignificant.

“This amount to me is useless since the burden on Hong Kong’s working class is very heavy, it doesn’t help a lot,” she said.