The HKGCC is calling for a two-tiered corporate tax system, a Regulatory Impact Assessment system for new legislation and the elimination of the Double Stamp Duty. Will it get what it wants tomorrow?
Photo: Chris Lusher
The HKGCC, as Hong Kong’s most powerful business lobby, carries weight in this town. About 450 of 1200 Election Committee votes are in the business sector and business related professions. They want tax reform, less red tape, the end of the Double Stamp Duty (DSD), and more commitment to innovation development.
They also expect the government to keep to old promises that the MPF could be offset by the long term retirement pay. Tomorrow will show if the CE is with business – or against it.
On market regulations and competitiveness
Optimising (ie. minimising) market regulations to promote competitiveness is an area the HKGCC would like to see the government show commitment. In this, the Chamber is not alone (see our previous coverage of international Chambers’ policy address recommendations).
The HKGCC and the British Chamber are aligned in calling for regulatory impact assessments (RIA), to be carried out for new and existing regulations. While the British counterparts draw insights from Hong Kong’s environmental impact assessment (EIA) system, the HKGCC suggests the government to refer to the UK Government’s “one in, two out” principle. The principle states that for every (British) pound of compliance cost incurred by a new regulation, there should be at least two pounds of savings achieved through revisions in legislation.
On the matter of tax, the Chamber proposes a “simple and competitive” two-tiered profits tax structure, with the rate imposed on the first HK$2 million taxable profits cut to 10%, with in mind the “notable rise” of free trade zones in Guangdong (addressed as “our backyard” in the paper), Shanghai, Fujian and Tianjin. Meanwhile, the Chamber asks for a reduction of the existing corporate tax rate from 16.5% to 15%.
Tax concession for startups, IP and aircraft leasing hub is encouraged, while the DSD, targeted at the property market, is favoured for elimination.
On innovation & technology
The HKGCC has a close enough connection with the government that it knows how to align its goals with those of the government. This is the year to push for innovation and technology development.
The Chamber has seized on the idea of ‘Smart City’, with East Kowloon as a pivotal testing ground. The Chamber argues that Hong Kong possesses various attributes to allow it to embed many smart city applications, but government spending on R&D has been “less than meaningful”.
The proposed measures include, among others, increasing the percentage of GDP spent on R&D development to over 1% and doubling the existing R&D Cash Rebate Scheme from 10% to 20%. Regarding the Smart City initiative, the Chamber urges the government to set up an institutional framework which would enhance cross-departmental decision-makings, thereby facilitating the adoption of a Spatial Data Infrastructure (SDI) for applications development. In other words, they want to link the reams of data collected from cameras, phones, traffic and every other wired device in the urban environment to make smart decisions about everything from transport to energy efficiency and more.
Unlike the low-key approach of the British Chamber, the Chamber does not hold back from stating clear their concerns over abolishing the MPF offset mechanism, stating that the mechanism “was a key condition for the business sector’s support to MPF then” and that the government should conduct a “comprehensive review of the entire MPF system, including its fees and returns” instead.
Nor does the Chamber have kind words regarding the proposed implementation of standard working hours: “Adopting standard working hours will undermine such flexibility [on cutting working hours rather than reducing jobs] for businesses to adapt to market changes as well as our long-term competitiveness,” the Chamber states.
Alternatively, the Chamber focuses on education and employee training. The GCC calls on the government to appeal to overseas talent and multinational corporations by ensuring enough international school spaces for children of incoming families. Also, they want rebates for investment in human capital, suggesting firms be granted a “super tax reduction” of 150% for costs paid on employees training related to innovation and technology.
Try not! Do… or Do Not!
The Chamber does express its concerns on recent political divisiveness, calling on the government to articulate a clear vision while lawmakers should restrain from “constant bickering and finger-pointing” that “have replaced the ‘can do’ spirit that Hong Kong was renowned for”.
It also turns its criticism to the government’s consultations.
“The many rounds of lengthy consultations on some subjects often appear to be little more than an exercise in stalling actual decision making. The Chamber urges the Government to review the stakeholder engagement process to ensure that genuine two-way communication is maintained throughout and stakeholders’ views and concerns are considered and integrated in final policy decisions,” the Chamber states.