Rebate Sparks Fury In Hong Kong

Recent tax tinkering by the Hong Kong government favours landlords are sparking fury among those clamouring for more transformative policy change to be applied to the territory’s property market

- Eli Meixler

Hong Kong’s housing, new residents are quick to learn, is something of a paradox: the city’s thicket of towering skyscrapers belying the suffocating spaces where most of its residents retire at night.

Government officials routinely highlight the severe shortfall of affordable housing—the result of ever-rising demand, limited land supply, powerful property developers—as “a top priority” for reform. So many were perplexed by news last April, that new regulations would lift Hong Kong’s largest landholders a wash of new tax returns.

Hong Kong properties are subject to a five percent indirect tax on their rateable value, or estimated annual rent fee. But owners rarely pay the full rate. In recent years the government has offered one-off rate rebates as a relief measure to ease the burden on property owners. For the 2018-2019 budget, the city’s Financial Services and the Treasury Bureau raised maximum quarterly tax concessions from HKD1,000 to HKD2,500 (USD127 to USD318).

The hike may not seem so significant, though small businesses and families will likely appreciate a small bonus. The real jackpot is for developers: the waiver applies not per property owner but on property owned, meaning the city’s real estate super-gentry could be in for a major windfall.

Hong Kong’s 10 largest landlords control a combined 40,000 units, making them eligible for some HKD256 million (USD32.8 million) under the new tax breaks. The top owner alone would collect HKD102.6 million (USD13 million). That’s a bit more than pocket change.

The proposed rate change was received with predictable public chagrin. The rebate is expected to cost the government HKD17.8 billion (USD2.3 billion), which critics argue would be better spent on healthcare, education, and social services than lining landlords’ pockets.