Hong Kong Urged to Reduce Corporate Taxes
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Hong Kong's economy has worsened sharply since early 2004, enabling the Chief
Executive to promise in his election pledge to reduce the profits tax rate to 15
percent over his current term of office. This would form a reduction of nearly
14 percent from the current headline rate, enhancing Hong Kong's reputation as
one of the world's most efficient jurisdictions in which to do business.
A Hong Kong-based financial consultancy reports on its website that the Hong
Kong government has been pressed to utilize its record budget surplus to reduce
taxes on corporate profits. The government in Hong Kong was urged to bring down
Hong Kong corporation tax further, considering the global trend, the financial
Yvonne Law Shing Mo-han, chairman of the Hong Kong Institute of Certified
Public Accountants' taxation committee, said providing increased tax relief
would stimulate more corporations to root regional headquarters in the
She said the institute backs Hong Kong Chief Executive Donald Tsang's call to
decrease the corporate profits tax and standard rate of salary tax by 1 percent
to 16.5 percent and 15 percent. But, Law added she believes "there is space for
further slash in the years to come".
Law said that it is not a secret that various jurisdictions utilize tax
incentives to improve their stature as business centers, and Hong Kong is no
exception. Law also said that they support giving regional headquarters full
profits tax exemption for management and consultancy income generated by the
Hong Kong entity from associated overseas entities.
The high rate of Hong Kong corporation taxes are a drag on the entry of
foreign direct investments (FDI) into the country as opponent economies such as
China, Spain, Singapore and Germany are likely to cut tax rates, a consultancy
firm said in a report.
In a survey spreading across 92 countries, the consultancy firm said the
average rate of corporate tax in the EU was 24.2 per cent, compared with 27.8
per cent in the OECD countries, 28 per cent in Latin America and 30.1 per cent
The institute also called on the government to put into effect 'polluter pays
taxes' comprising electronic road pricing, fuel duties, air and water pollutant
taxes, and other resource consumption taxes. Hong Kong will possibly post a
record budget surplus of HK$105.2 billion (US$13.5 billion) in the 2007-08
fiscal year and offer tax cuts consequently. Close to HK$40 billion in tax
relief may be announced by Financial Secretary John Tsang.
With the large budget surplus, it is believed the government can afford to
introduce some concessions to assist the less fortunate in society. Hong Kong
was successful in achieving a second straight budget surplus of HK$58.6 billion
in the 2006-07 year. The government predicts another surplus of HK$25.4 billion
for the year closing March 2008.
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Article Published/Sorted/Amended on Scopulus 2008-07-03 09:08:35 in Tax Articles