Austerity beckons, fiscal surplus cut by two-thirds

The Legislative Assembly has passed the final reading of the amended 2015 Budget. The law was proposed by the newly incumbent Secretary for Economy and Finance, Lionel Leong Vai Tai, in March after taking office and had been discussed by the Second Standing Committee of the Legislative Assembly. It was sent for final voting at the plenary session at the Assembly yesterday.
Secretary Leong said when introducing the amendments that the original Budget that was passed last year was the basic Budget but revisions needed to be made because of the actual situation of the expenditure of this year as well as the fact that the primary source of income – gaming tax – has decreased at a pace and for a period beyond the government’s expectations.
The amended 2015 Budget estimates that the total income of the government this year will reach some MOP120 billion, down 22.4 per cent on the original estimate of MOP155 billion in the first 2015 budget that was approved by the legislators at the end of last year. Meanwhile, the amended budgeted total expenditure is some MOP83.7 billion, a 0.1 per cent increase compared to the original budget.
The amendments suggest decreasing the budgeted direct gaming tax – accounting for 83 per cent of the government’s total revenues last year – by 27.3 per cent to MOP84 billion from MOP115.5 billion, which will now account for 80.3 per cent of the government’s budgeted total revenues for 2015.
The adjusted budget, proposed by the government at the beginning of April, also decreases the government’s allotment to the Social Security Fund, which provides pensions and several allowances, by 27.2 per cent to MOP3.6 billion. Moreover, it lowers the expected income from stamp duty imposed on housing transactions and vehicle tax by 20 per cent and 13.9 per cent to MOP1.8 billion and MOP1.2 billion, respectively, as a result of the gloomier expectations of the property market and the high-end vehicle market.
Tax exemption
The amended budget also mandates that the ceiling of the amount of the exemption for profits tax will be increased to MOP600,000 from MOP300,000 as part of the tax benefits measure for local small and medium enterprises (SMEs).
Legislator Ella Lei Cheng I pointed out that the some large corporates may also benefit from this policy. In reply, Lionel Leong explained that the measure will apply to some 56,000 companies – 4,193 from Group A, and 52,627 from Group B, which mainly comprise SMEs. As a consequence, the government income from this sector would be reduced by another MOP98 million.
When handing in their petition and the law for all the legislators to review, the president of the Second Standing Committee of the Legislative Assembly, Chan Chak Mo, said that members of his committee understand the government’s concerns in revising the budget due to the subjective circumstances of the slumping gaming revenues and was concerned about the revised budget’s impact on people’s livelihood.
Chan said the government has explained the amended budget was proposed under the premises that public administration and services quality can be guaranteed and expenditure on people’s livelihood issues would not be affected. The government also indicated even if an ‘austerity policy’ needed to be launched if the revenues from gaming tax continue to drop the government would first economise on its expenditure, such as on labour and investment (except PIDDA – government’s Public Investment Plan), and some autonomous organisations and funds’ subsidies.