(Bloomberg) -- Hong Kong, famed as a low-tax, high-income haven, will increase tax on high earners in a bid to bring down its deficit.
A two-tier tax system will be introduced from April, with income of up to HK$5 million ($640,000) taxed at 15%, and anything higher than that being taxed at 16%. Previously tax for all individuals was capped at 15%.
The move will affect about 12,000 people, or about 0.6% of taxpayers, Financial Secretary Paul Chan said.
Hong Kong is looking at ways to plug the hole in its budget, with the deficit for the year ending March 31 projected at HK$101.6 billion, almost double the estimate initially laid out a year ago. Yet increasing the tax on the high earners may deter finance workers at a time when the government is seeking to revive the industry.
The move will bring in about HK$910 million of additional revenue each year, Chan said, adding that the new tax rate will still be lower than in other advanced economies.
--With assistance from Adrian Kennedy and Young-Sam Cho.
(Updates to add details in second and fourth paragraphs.)
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