This file photo dated Sept 27, 2018 shows the logo of EY (Ernst & Young), a multinational professional services firm, in Madrid. (PHOTO / AFP)

Global auditing advisory firm Ernst and Young recommends a one-off financial relief package for individuals and businesses worth HK$32 billion ($4.1 billion) as a targeted measure for devoting government resources to those in need while maintaining a reasonable fiscal reserve level.

Targeted support to individuals includes reducing salaries tax and tax under assessment for 2022-23 by 100 percent, capped at HK$10,000 for taxpayers with salaries tax charged at progressive rates; waiving rates for one domestic residential property per individual for 2023-24, subject to a ceiling of HK$1,000 per quarter; granting an electricity charge subsidy of HK$1,000  for 2023-24 to each residential electricity account; and providing an extra half month of various social security payments.

As a result, Hong Kong’s fiscal reserves will be reduced to HK$822.1 billion by the end of March this year, equivalent to 12 months of estimated government expenditure, the lowest figure according to EY estimates

Regarding businesses, EY suggests reducing profits tax for 2022-23 by 100 percent, capped at HK$10,000 for companies with assessable profits below HK$2 million; waiving rates for non-domestic properties for 2023-24, subject to a ceiling of HK$2,000 per quarter for each ratable property; waiving business registration fees for 2023-24; and further extending the existing waivers or concessions of government fees and charges.

ALSO READ: HKSAR tipped to record $16.1 billion deficit

In this year’s budget proposal, EY does not recommend that the Hong Kong Special Administrative Region government disburse consumption vouchers again to boost the economy.

“While we are on the road to recovery, the government should remain cautious about the uncertainties and fluctuations of the external environment in proposing supportive measures in the Budget 2023-24,” said Paul Ho, Hong Kong financial services tax leader at EY Tax Services.

READ MORE: HKSAR to dial down expansionary fiscal policy

“We also have to weigh the impact of more government spending on the anticipated government budget deficit and decrease of fiscal reserve,” Ho noted in the Thursday press conference.

EY estimates the Hong Kong SAR will record a budget deficit of HK$135 billion in financial year 2022-23 compared to the government forecast of HK$56.3 billion. This is due to the fact that the reduction in government expenditure is offset by the decrease in land premium, stamp duty and profits tax and salaries tax receipts.

ALSO READ: 'Positive growth' seen for HKSAR's fiscal reserves this year

As a result, Hong Kong’s fiscal reserves will be reduced to HK$822.1 billion by the end of March this year, equivalent to 12 months of estimated government expenditure, the lowest figure according to EY estimates.

“As Hong Kong resumes normal travel with the mainland, the city’s economic prospects soon become clear this year. As there will be more economic activities, we expect government revenues for 2023-24 will rise accordingly,” Ho argued.