Accounting firm Ernst & Young (EY) on Monday called on SAR authorities to consider offering "moderate" but "targeted" sweeteners for taxpayers in the upcoming Budget.

It said it’s forecasting the government to record a fiscal deficit of around HK$500 million in the 2025-26 financial year. The city’s fiscal reserves, it added, is expected to stand at HK$653.8 billion in March.

Speaking at a press conference, Ricky Tam, EY's tax services partner, said there is room for the government to implement measures like raising tax allowances for dependent grandparents as well as parents by HK$10,000 a year.

"We believe that these measures can be more precisely beneficial to citizens in need. Comparing to the one-off relief measures, we hope that our proposals can be more sustainable," he said.

Other proposed measures include reducing profits tax, salaries tax, and tax under personal assessment by 100 percent, capped at HK$1,500.

Meanwhile, Jasmine Lee, EY Hong Kong and Macau Managing Partner, said the SAR must also press ahead with targeted investments in tech-related initiatives and the building of Northern Metropolis to pursue long-term growth.

"I think the key is not to see when we'll return to have [fiscal balance], as currently the overall economic development of Hong Kong presents us with many new opportunities for us to take bold steps and create something new," she said.

"Instead, we should focus on how much investment we should make, and how many new [growth] areas we can create.”