In a recent Legislative Council session, Christopher Hui, Secretary for Financial Services and the Treasury, engaged with issues raised by Hon. Kingsley Wong concerning tax relief measures for Hong Kong taxpayers who support elderly dependents residing in the Greater Bay Area (GBA). This discussion highlighted the critical challenge of harmonizing tax policies with the government’s initiatives aimed at facilitating retirement within the GBA.
Addressing Retirement Across Borders
In recent years, Hong Kong has implemented various policies aimed at encouraging its residents to work, study, and retire in mainland cities within the GBA. However, many express concern that existing tax policies do not fully align with these objectives. Central to the debate is the question of whether allowances for dependent parents and grandparents—along with deductions for elderly residential care expenses—should be broadened to include dependents living in the nine mainland cities of the GBA.
Currently, eligibility for these tax reliefs is confined to dependants who are classified as “ordinarily resident” in Hong Kong or in care homes located in the city. Critics argue that this restriction may inadvertently deter elderly individuals from relocating to the GBA, which offers a more affordable retirement alternative.
The Government’s Position: Cautious Fiscal Management
Mr. Hui reiterated the government’s commitment to the territorial source principle of taxation. This principle dictates that only income and expenses associated with Hong Kong are eligible for tax consideration. He expressed concerns that extending claims for dependents and care facilities outside the city could raise the likelihood of fraudulent claims and negatively impact public finances, especially as Hong Kong tackles its ongoing fiscal deficit.
“We must find a balance between fostering elderly-friendly policies and maintaining fiscal responsibility,” Mr. Hui stated. He confirmed that there are currently no plans to extend these allowances or deductions to include dependants or facilities located in mainland cities.
Numbers Behind the Trend
Data from the Census and Statistics Department reveals that an increasing number of Hong Kong residents are choosing to reside in Guangdong Province. By the end of 2023, approximately 130,000 residents aged 60 and older were living in the province, an increase from 116,400 in 2021. This trend underscores the growing appeal of the GBA for retirees, attributed to its proximity, cultural familiarity, and relatively lower living costs.
However, the Inland Revenue Department does not maintain records on how many taxpayers have been denied dependent allowances or residential care deductions due to having dependents in the mainland. This gap in data has sparked concerns about the extent of the issue, leading some to believe it may be more pervasive than the government acknowledges.
Public Reaction: A Call for Flexibility
Many critics argue that the government’s current stance could alienate families seeking viable retirement options in the GBA.
“The government promotes the Greater Bay Area as an extension of Hong Kong,” remarked a taxpayer supporting elderly parents in Guangdong, “but the practical support’s lack feels out of touch.”
Conversely, there are those who defend the government’s cautious approach. An economist stated, “Extending tax relief beyond Hong Kong would necessitate robust measures to prevent abuse.”
Looking Ahead: Potential Policy Revisions
As the population ages and cross-border connectivity strengthens, the government is likely to face increasing demands to reassess its tax policies. While maintaining fiscal prudence remains a top priority, experts recommend considering targeted pilot programs or enhanced monitoring systems as ways to address these concerns without exposing the system to potential abuse.
For the time being, taxpayers and retirees interested in the GBA will need to navigate the existing policy challenges. Whether or not the government will adapt its approach hinges on achieving a delicate balance between Hong Kong’s financial realities and its overarching vision for an integrated, elderly-friendly Greater Bay Area.
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