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Tax concession for mortgage interest payments

Some members have urged the Government to introduce a tax concession for mortgage interest paid by first-time home buyers. There are good arguments against such a concession. Under the current tax regime, home owners already enjoy two tax benefits. First, any capital gain on disposal of a private residential property by a home owner is not subject to profits tax. Second, a home owner is exempt from property tax on private residence. Granting relief for mortgage interest payments would have the effect of singling out this group of people for even more favourable treatment. Moreover, to provide a tax concession for first-time home buyers would add complexity and cost to the tax system, and is contrary to the international trend to abolish or limit tax relief on home mortgage interest payments. It should also be remembered that personal allowances for salaries tax purposes are not designed in favour of specific classes of expenditure. To introduce a concession for housing expenditure would also make it difficult in future to resist similar requests for other classes of expenditure not incurred in the production of assessable income.

Conclusion

In conclusion, we share Members' views that some first-time home buyers may need assistance to purchase their own homes, but we do not agree that the motion and the amendment moved by the Honourable Fung Kin-kee and the Honourable Tso Shiu-wai respectively are the only solutions. As I have explained at length, the Government, public housing organisations and the private sector have already put in place a wide range of schemes, options and measures to assist first-time home buyers to purchase their own homes. These are concrete plans in themselves which can meet the aspiration for home ownership for those who are genuinely in need of help, without changing our prudential banking supervision policy or our low tax policy. I would stress also that the Government would continue to make land available to increase the supply of both public and private housing in Hong Kong. For these reasons, Mr President, the Administration does not support the motion or its amendment.

Thank you.

End/Wednesday, January 18, 1995