According to the proposal outlined by Financial Secretary Paul Chan in the Budget two years ago, the government intends to replace the current uniform 5% rate with a progressive tax system based on the rateable value of the properties, with the highest rate reaching 12%. This reform is expected to affect approximately 42,000 residential properties, involving a significant number of residential units.

It is reported that this reform will only impact high-end residential properties with an annual rateable value exceeding HK$550,000, accounting for 1.9% of the total. However, the changes in this small portion of properties will bring the government an additional annual revenue of about HK$840 million. The government plans to submit the amended bill in the first half of this year and hopes the new system will officially take effect in January 2025.

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The proposal for this progressive rates system first appeared in the Budget for the 2022/23 fiscal year. It has now entered stages such as collecting public opinions, revising regulations, and upgrading computer systems to ensure the smooth implementation of the new system as planned. The new system will reflect the principle of "those who can afford more pay more" and will not significantly impact the residential market for the majority of citizens.

Under the new rates system, the annual rateable value of the vast majority of Hong Kong residential properties (approximately 98% or 2.16 million residential units) will remain below HK$550,000, maintaining the 5% rates unchanged. For about 24,000 residential units with an annual rateable value between HK$550,000 and HK$800,000, the maximum rates will be 8%. For approximately 18,000 residential units with an annual rateable value exceeding HK$800,000, the new rates can reach up to 12%.

To illustrate, for a property with an annual rateable value of HK$2 million, its annual rates payable will increase to HK$191,500, requiring an additional payment of HK$91,500 compared to before. This adjustment will make high-value properties bear a greater tax burden while ensuring the fairness and reasonableness of the tax burden. The implementation of the new system is expected to help the government increase revenue while also promoting the healthy development and stability of the real estate market.