Author Archives: hksar gov

     Following is a question by the Hon Paul Tse and a written reply by the Secretary for Development, Ms Bernadette Linn, in the Legislative Council today (November 13):
 
Question:
 
     It has been reported that incidents involving defaults or arrears of payment by subcontractors of public works of the Education Bureau, the Housing Bureau and public hospitals have occurred consecutively in recent months. Specific examples include: a material supplier who undertook ceiling works for the Education Bureau and was owed $530,000 by a subcontractor made her plea by attempting to jump off from a building with a baby in her arms; the subcontractors of aluminium window works at construction sites of the Housing Department in two districts could not get payment of more than $11 ‍million from the upper tier, resulting in wage defaults to more than 50 ‍workers; and more than 30 imported workers were suspected to be subject to salary exploitation in the expansion project of United Christian Hospital. There are views pointing out that the Government, being the largest employer in public works, has the responsibility under the subcontracting system to ensure that subcontractors of various tiers receive the project payment duly and on time, so as to prevent broken capital chains of projects and the resultant misery of workers not getting paid for their hard labour. Some members of the construction industry disclose that the Government’s issuance of project payment is much later than before, resulting in the late availability of funds to contractors and subcontractors of various tiers and making it difficult for them to pay workers on time. In this connection, will the Government inform this Council:
 
(1) of the respective numbers of complaints received and conciliated by the Labour Department in each of the past three years on wages in arrears and payment defaults that are related to government projects;
 
(2) whether it has sought to understand the reasons behind the series of cases of wages in arrears and payment defaults by subcontractors of government projects in recent days;
 
(3) given that the public coffers have failed to make ends meet for consecutive years with fiscal deficits of over a hundred billion dollars in three out of the last four years, and the Financial Secretary has even said in a radio interview that fiscal deficits are expected to continue in the future three years, whether the Government has studied if the serious fiscal deficits have caused the Government to issue project payment later than before; and
 
(4) given the continuous fiscal deficit, under the current subcontracting system, what policies are in place to eradicate the problem of wages in arrears and payment defaults by subcontractors of various tiers?
 
Reply:
 
President,
            
     The current financial hardship faced by the construction industry is mainly due to the shrinkage of the private construction market, resulting in a decline in construction volume. However, the Government will continue to invest in the formation of land, infrastructure works and construction of facilities that are required by the community, and strive to maintain a steady growth in the capital works expenditure which will help alleviate the financial distress faced by the construction industry. In the coming five years, the average annual capital works expenditure of the Government will be about $90 billion, which is more than the average annual expenditure of $76 billion in the past five years, representing an increase of about 17 per cent. This demonstrates the Government’s continued allocation of resources for capital works projects.
 
     Having consulted the Labour Department (LD), our responses to the four parts of the question raised by the Hon Tse are as follows:
 
(1) In the past three years (2021 to 2023), the numbers of the construction industry related labour disputes (i.e. cases involving more than 20 employees) handled by the LD are 31, 36 and 40 respectively, in which the number of cases involving the Government and other public organisations are nine, nine and four respectively, i.e. about 30 per cent, 25 per cent and 10 per cent of the total number of cases in the respective years. It can be seen that the majority of the construction industry related labour disputes handled by the LD involve private works.
 
(2) As far as we understand, there are many reasons that can lead to labour disputes, e.g. financial difficulties faced by contractors/subcontractors; occurrence of divergent views or disputes in construction contracts/subcontracts which may result in contractors/subcontractors not being able to receive payments that they believe they should be entitled to in a timely manner; disputes in employment contracts between contractors/subcontractors and their employees (e.g. the way how performance-based bonus or overtime work should be calculated), etc. As far as public works are concerned, the problems generally involve subcontracts and its associated employment contracts.
 
(3) As one of the major clients in the construction industry, the Government has always been making contract payments in a timely manner based on the works progress and contract terms. Furthermore, we have been paying close attention to whether public works contractors have sufficient cash flow to carry out the works smoothly. In this connection, we have enhanced contractors’ cash flow through a number of contract payment arrangements. For example, we provide advance payment to contractors at the onset of contracts; we adopt target contract form of the New Engineering Contract in large-scale public works contracts in which contractors are paid based on their forecast expenditure; etc. To assist the construction industry to tide over the current difficult economic situation, in addition to the above-mentioned payment arrangements, we have recently co-ordinated with all works departments to arrange more frequent payments to contractors and to further split payment milestones into smaller ones as far as possible so that the contract payments can align more closely with contractors’ works progress.
 
(4) We have implemented various measures in public works contracts, including prohibiting contractors from subcontracting the whole of the works, limiting the maximum number of tiers of subcontracting to two, and requiring contractors to submit subcontractor management plans and implement such plans strictly. Such measures serve to strengthen the supervision and management of subcontracting situations on site. Besides, according to the Employment Ordinance (Cap. 57), if a subcontractor of a construction contract fails to pay its employees, the relevant contractor is liable to pay such subcontractor’s employees the first two months’ unpaid wages. If the contractor fails to pay the outstanding wages, we can pay such subcontractor’s employees on behalf of the contractor in accordance with the contract, and the amount so paid will be deducted from the contract payments that the Government needs to pay to the contractor.
 
     The Government has been closely attentive to the healthy development of the construction industry. The proposed Construction Industry Security of Payment Bill (the Bill) is being scrutinised in the Legislative Council (LegCo). The Bill aims to improve the longstanding issue of delay contract payment among the stakeholders along the supply chain, while also seeking to reduce occurrences of wage arrears of workers. We will fully support the LegCo’s scrutiny of the Bill to facilitate the early passage and implementation of the Bill. This will provide better protection for stakeholders in the construction industry to receive payments on time and in full for work done, thereby promoting the healthy and sustainable development of the construction industry. Furthermore, we have proactively introduced the Security of Payment Provisions in public works contracts on a pilot basis since October 2021, providing enhanced safeguards for contractors and subcontractors. read more

     The effective exchange rate index for the Hong Kong dollar on Wednesday, November 13, 2024 is 106.3 (same as yesterday’s index). read more

     Following is a question by the Hon Judy Chan and a written reply by the Secretary for Development, Ms Bernadette Linn, in the Legislative Council today (November 13):   Question:      â€‹It ha… read more

     The Transport Department (TD) today (November 13) announced that the auction of traditional vehicle registration marks will be held on December 1 (Sunday) in Meeting Room S421, L4, Old Wing, Hong Kong Convention and Exhibition Centre, Wan Chai.

     “A total of 350 vehicle registration marks will be put up for public auction. The list of marks has been uploaded to the department’s website, www.td.gov.hk/en/public_services/vehicle_registration_mark/index.html,” a department spokesman said.
            
     Applicants who have paid a deposit of $1,000 to reserve a mark for auction should also participate in the bidding (including the first bid at the reserve price of $1,000). Otherwise, the mark concerned may be sold to another bidder at the reserve price.
            
     People who wish to participate in the bidding at the auction should take note of the following important points:

(1) Successful bidders are required to produce the following documents for completion of registration and payment procedures immediately after the successful bidding:
(i) the identity document of the successful bidder;
(ii) the identity document of the purchaser if it is different from the successful bidder;
(iii) a copy of the Certificate of Incorporation if the purchaser is a body corporate; and
(iv) a crossed cheque made payable to “The Government of the Hong Kong Special Administrative Region” or “The Government of the HKSAR”. (For an auctioned mark paid for by cheque, the first three working days after the date of auction will be required for cheque clearance confirmation before processing of the application for mark assignment can be completed.) Successful bidders can also pay through the Easy Pay System (EPS). Payment by post-dated cheques, cash or other methods will not be accepted.

(2) Purchasers must make payment of the purchase price through EPS or by crossed cheque and complete the Memorandum of Sale of Registration Mark immediately after the bidding. Subsequent alteration of the particulars in the memorandum will not be permitted.

(3) A vehicle registration mark can only be assigned to a motor vehicle which is registered in the name of the purchaser. The Certificate of Incorporation must be produced immediately by the purchaser if a vehicle registration mark purchased is to be registered under the name of a body corporate.

(4) Special registration marks are non-transferable. Where the ownership of a motor vehicle with a special registration mark is transferred, the allocation of the special registration mark shall be cancelled.

(5) The purchaser shall, within 12 months after the date of auction, apply to the Commissioner for Transport for the registration mark to be assigned to a motor vehicle registered in the name of the purchaser. If the purchaser fails to assign the registration mark within 12 months, allocation of the mark will be cancelled and arranged for reallocation in accordance with the statutory provision without prior notice to the purchaser.
       
     For other auction details, please refer to the Guidance Notes – Auction of Traditional Vehicle Registration Marks, which can be downloaded from the department’s website, www.td.gov.hk/en/public_services/vehicle_registration_mark/tvrm_auction/index.html.
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     Following is a question by the Hon Adrian Ho and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (November 13):

Question:

     According to the information released by the Government at the end of September this year, in the first five months of this financial year alone and before taking into account the issuance and repayment of bonds, the Government has recorded a deficit of $201 billion, far exceeding the consolidated deficit of $143.8 billion for the whole year as forecast in the Budget of this financial year. There are views that the above situation reflects the Government’s difficulty in meeting the Medium Range Forecast (MRF) in the Budget of this financial year (i.e. the Operating Account will record a surplus from the 2026-27 financial year onwards and the Capital Account will record a surplus in the 2028-29 financial year), and that once the relevant situation worsens, the Government will have difficulty in complying with the relevant requirement under Article 107 of the Basic Law to strive to achieve a fiscal balance in drawing up its budget. In this connection, will the Government inform this Council:

(1) in the remaining months of this financial year, other than revenues including salaries and profits taxes that are mostly received towards the end of a financial year, what additional measures the authorities plan to introduce to reduce the consolidated deficit for the whole year before taking into account the issuance and repayment of bonds;

(2) of the authorities’ practical measures in place in each year from the next financial year to the 2028-29 financial year to meet the MRF of recording surpluses in both the Operating Account and the Capital Account;

(3) as there are views that while the 2023-24 Budget proposed that the Government issue government bonds totalling $65 billion in each year from that financial year until the 2028-29 financial year, the Budget of this financial year puts forward a plan to issue government bonds totalling about $95 billion to $135 billion in each year from this financial year until the 2028-29 financial year, indicating the Government’s tendency to gradually increase the amount of bond issuance that will lead to a miscalculation of the time required to achieve fiscal balance, whether the Government has assessed if it is required to readjust the amount of bond issuance in this financial year and in the next few financial years; if it has assessed and the result is in the affirmative, of the latest projection for the amount of bond issuance in each year from this financial year until the 2028-29 financial year, and how the relevant adjustment will affect the aforesaid MRF in the Budget of this financial year; and

(4) as there are views that the estimated land premium revenue for this financial year is $33 billion, but as at October this year, the proceeds from the land premium of land sales in this financial year were only $720 million, and even after taking into account the proceeds from cases of registered lease modifications, land exchanges, private treaty grants and lot extensions in the second and third quarters of 2024, the total land premium revenue is merely $4.9 billion, which is a worrying situation, of the Government’s plan in place to make up for the shortfall of almost $30 billion in estimated land premium revenue in the remaining months of this financial year?

Reply:

President,

     Having consulted the Development Bureau, our consolidated reply to the question raised by Hon Adrian Ho is as follows:

     The Government has all along been upholding the principle of keeping expenditure within the limits of revenues in drawing up its budget as enshrined in Article 107 of the Basic Law. We strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product, with a view to ensuring the resilience and sustainability of our public finances. The Government has constitutional responsibility to uphold the principle of fiscal prudence and achieve fiscal balance over a period of time.

     During the earlier pandemic, the Government launched several rounds of large-scale counter-cyclical measures to support the enterprises and citizens. In addition, the implementation of anti-epidemic measures led to a sharp increase of expenditure. Therefore, relatively larger fiscal deficits were recorded. Furthermore, as a small and externally-oriented economy, Hong Kong is inevitably susceptible to the influence of a complicated and volatile external environment. While revenues related to the asset market will still require some time to fully recover, the Government has to keep devoting resources to strengthen the growth momentum of our economy and enhance public services. This is why we have a deficit budget for the 2024-25 financial year.

     The Government is determined to overcome the challenges facing our public finances. In the 2024-25 Budget, the Financial Secretary put forward a comprehensive fiscal consolidation programme, which seeks to narrow our fiscal deficit progressively and restore fiscal balance in a few years’ time by containing the growth of expenditure, increasing revenue and issuing government bonds.

     On expenditure, the Government strictly contains the growth of its operating expenditure, including continuing to maintain zero growth in the civil service establishment with the aim of containing the establishment at a level not exceeding that as at end-March 2021, and implementing the Productivity Enhancement Programme, under which recurrent government expenditure will be cut by 1 per cent each year from 2024-25 to 2026-27 on the premise that such schemes as the Comprehensive Social Security Assistance Scheme and the Social Security Allowance Scheme will not be affected. In addition, the Government reviews the cost-effectiveness of capital works projects and gives due regard to priority and urgency to adjust the implementation schedule. Some works projects that are at a comparatively mature stage of planning, including the site formation and infrastructure works for the Northern Metropolis, will continue to be taken forward as planned. For those that are currently at the preliminary planning or conceptual stage, the implementation schedule will be adjusted in light of their importance and other factors.

     On revenue, the Government will put in place four revenue-raising measures in 2024-25, namely (a) implementing a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the year of assessment 2024-25; (b) increasing business registration fees and branch registration fees by 10 per cent with effect from April 1, 2024; (c) implementing the progressive rating system for domestic properties starting from January 1, 2025; and (d) resuming the collection of hotel accommodation tax at a rate of 3 per cent with effect from January 1, 2025. The four measures are expected to bring in revenue of about $3.1 billion in total for the Government annually.

     In addition, the Government will apply the global minimum tax rate of 15 per cent on large multinational enterprise groups with an annual consolidated group revenue of at least EUR 750 million, and impose the Hong Kong minimum top-up tax starting from 2025 in accordance with the global minimum tax proposal drawn up by the Organisation for Economic Co-operation and Development to address base erosion and profit shifting. Based on our current estimates, the measures will bring in an additional tax revenue of about $15 billion for the Government annually starting from 2027-28. We plan to introduce the relevant bill into the Legislative Council by January 2025.

     The Government has made the issuance of government bonds a financing option for infrastructure projects, with a view to driving the development of the Northern Metropolis and other infrastructure with the capital raised from the market. Taking into account the pace of development in respect of the Northern Metropolis and other infrastructure projects, the Government plans to issue bonds worth about $95 billion to $135 billion per annum from 2024-25 to 2028-29. The actual size of bond issuance will be subject to the prevailing fiscal position, market situation and works progress. The Government will continue to adhere strictly to fiscal discipline and keep government debt at a prudent level. It is expected that the ratio of government debt to Gross Domestic Product will range from about 9 per cent to 13 per cent during the period from 2024-25 to 2028-29, which is much lower than most other advanced economies. We will look into the scale and forms of bond issuance for the next few years when formulating the 2025-26 Budget.

     In formulating the Budget every year, the Government takes into account factors such as the overall performance of the property market, demand and supply situation in the market, and economic environment etc. in drawing up the Government Land Sale Programme of the upcoming year and estimating the revenue from land premium in the next financial year. Since the pace of land sale and the revenue from land premium are often affected by property market situation and economic environment, there may be a variance between the actual receipt and the estimate of land premium. As at end October this year, the total revenue from land sales by tender in this financial year as well as land transactions involving private treaty, lease modification, land exchange, etc. is around $3.7 billion.

     Furthermore, the Government’s overarching goal when supplying land is to maintain a sustained supply so as to allow for the healthy development of the property market. The Government will judge the hour and size up the situation by considering the actual circumstances (including the economic environment and market changes) and roll out sites to the market in a prudent manner. The Government will announce its quarterly land sale programme in advance, and maintain flexibility to put up additional sites for sale in course of a quarter. The Government will update the estimation of revenue from land premium in its 2025-26 Budget to be announced in February 2025.

     In preparing the Budget, the Government takes into account the levels of revenue, expenditure and fiscal reserves, as well as the imminent and long-term needs of the society in order to draw up suitable measures and financial arrangements. As the 2025-26 Budget exercise is about to commence, we will review the latest position and forecast in respect of the public finances, and draw up measures with a view to restoring fiscal balance in a few years’ time. read more