Budget 2026: Paul Chan Unveils Major Changes to EV Tax Breaks and Economic Growth Strategies

In the latest budget announcement, Financial Secretary Paul Chan has scrapped private electric vehicle tax breaks and raised the bond ceiling to HK$900 billion. The new 'Finance+' strategy aims to foster economic growth amid changing global dynamics.

Budget 2026: A Shift in Economic Strategy

In a significant move for Hong Kong's economic landscape, Financial Secretary Paul Chan unveiled the Budget 2026 on Wednesday, announcing a series of pivotal changes aimed at fostering growth and adapting to global economic shifts. Among the most notable changes is the decision to end the one-for-one tax breaks for private electric vehicles (EVs), a policy that has been a cornerstone of the city’s green initiative.

Ending EV Tax Breaks

The scrapping of private EV tax breaks marks a departure from the government's previous commitment to incentivize electric vehicle adoption. Chan explained that the decision was driven by a need to recalibrate fiscal policies in light of changing economic circumstances and to focus on broader sustainability goals. Instead of individual tax incentives, the administration will redirect its efforts towards enhancing public transportation and infrastructure for electric vehicles, aiming to create a more sustainable urban environment.

Raising the Bond Ceiling

In addition to the changes in EV incentives, Chan announced an increase in the bond ceiling to HK$900 billion. This move is designed to provide the government with greater flexibility in financing infrastructure projects and other public initiatives that are crucial for stimulating economic growth. The raised ceiling reflects the administration's commitment to investing in long-term projects that can bolster the local economy and create jobs.

‘Finance+’ Strategy Unveiled

Chan also introduced the new 'Finance+' strategy, which aims to enhance Hong Kong's position as a leading financial hub in Asia. The strategy focuses on leveraging financial technology, improving regulatory frameworks, and attracting international investments. Chan emphasized that this approach is essential for navigating the complexities of a post-pandemic economy and ensuring that Hong Kong remains competitive in the global market.

Growth Forecasts

Looking ahead, Chan forecasted an economic growth rate of between 2.5% and 3.5% for the upcoming year. This projection comes amid a backdrop of global uncertainties, including inflationary pressures and geopolitical tensions. The government aims to implement measures that will not only stimulate growth but also ensure stability in the face of these challenges.

Widening the Belt and Road Reach

In a bid to expand Hong Kong's economic influence, Chan also announced plans to widen the reach of the Belt and Road Initiative. By enhancing trade links and investment opportunities with countries involved in the initiative, the government hopes to tap into new markets and foster economic collaboration. This move is seen as a strategic effort to diversify Hong Kong's economic partnerships and reduce reliance on traditional markets.

Conclusion

As Hong Kong navigates a rapidly changing economic landscape, the Budget 2026 reflects a proactive approach to addressing both immediate fiscal challenges and long-term growth objectives. With the end of private EV tax breaks, an increased bond ceiling, and the introduction of the 'Finance+' strategy, the government is positioning itself to adapt to new realities while striving for a sustainable and prosperous future.