Govt Moots Tax Deductions On Voluntary MPF Cash

The government is hoping to encourage people to save more money for their retirement by making voluntary contributions to MPF accounts or annuity schemes tax deductible.

In a paper to Legco, officials suggest tax deductions could be offered on up to HK$36,000 a year, meaning that a person's net chargeable income would drop by the same amount.

An example in the paper shows this could save a single person on a monthly salary of HK$20,000, and who doesn't have children, around HK$720 in tax each year. If that person earned HK$60,000 the tax saving would shoot up to HK$6,120, the document for lawmakers suggests.

But unlike any voluntary contributions currently made, which are not tax-deductible, there would be withdrawal restrictions for those that do enjoy the tax deductions.

The government is also suggesting that premiums paid for deferred annuities should also be eligible for tax deductions, with restrictions in place on which products would qualify.

The Chairman of the Elderly Commission, Dr Lam Ching-choi, said the proposed tax deductions for annuity products would be very attractive, to middle-class and grassroots residents alike.

"These kind of annuity products themselves are very attractive, because they are actually insurance plans, which are guaranteed for life for a regular income. This kind of product is exactly what most retirees are looking for, and now if there is a tax break, it will attract more retirees."