Hong Kong’s new tiered tax system to affect high earners and government officials

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John Lee

28th February 2024 – (Hong Kong) The Hong Kong government has introduced a two-tiered tax regime within the 2024 Fiscal Budget, the details of which were announced earlier this week. The new system will see a continuation of the 15% standard tax rate for annual incomes up to HK$5 million. However, earnings exceeding this threshold will be subject to an increased rate of 16%.

The Chief Executive of Hong Kong, John Lee, whose annual salary exceeds the HK$5 million mark, will be one of the first to be impacted by the higher tax bracket. Lee is expected to pay at least an additional HK$4,264 in salaries tax, not accounting for his “long service” pay, which refers to the additional earnings for government officials with extended service.

The novel budgetary measure aims at increasing government revenue by an estimated HK$910 million annually and will affect roughly 12,000 taxpayers, representing a mere 0.6% of the total taxpayer population.

Lee, who earns an annual salary of HK$5,426,400, ranks as the second-highest-paid leader globally. Under the new tax regime, his additional tax liability will be modest in comparison to his total income.

A closer look at the salaries of the government’s top officials reveals that at least six bureau chiefs with long-standing government service will also face the increased tax rate, each paying an additional estimated HK$5,000 per annum. This includes Deputy Chief Secretary for Administration Warner Cheuk, who, after retiring as the Permanent Secretary for Innovation and Technology in 2019 with a salary at the D8 pay scale for senior civil servants, is estimated to have a “long service” pay of approximately HK$96,000 a month. Along with his current deputy salary of HK$4,360,800, Cheuk’s total income is expected to reach around HK$5.5 million, placing him in the new tax bracket.

The move to implement a two-tiered tax system is seen as a strategic attempt to increase revenue without imposing a significant burden on the majority of taxpayers. With only a small fraction of the population being affected, the government has opted for a targeted approach that seeks additional contributions from those in the highest earning brackets, including top-ranking government officials.