KPMG China welcomes the measures proposed by the HKSAR Government to return some of the economic benefits of the large fiscal surplus to taxpayers, as well as those measures to increase Hong Kong’s competitiveness and tackle the increasing financial burden arising from an ageing population.
The Government announced a substantial surplus of HKD63.8 billion and as a result it has once again proposed a number of one-off relief measures including salary and profits tax reductions of 75 percent capped at HKD20,000, increasing child allowances to HKD100,000, a waiver for rates, and extra allowance to Comprehensive Social Security Assistance recipients and rental waiver for public housing tenants. Given the considerable fiscal surplus again achieved by the Government, KPMG China supports continuing with these one-off relief measures to alleviate economic hardships of the lower income groups. However, the Government is aware of the need to uphold fiscal discipline and prudence and these one off relief measures should not be seen as a recurring practice.
KPMG China particularly welcomes the Government’s further review of the issue of better retirement protection for the elderly; the HKD50 billion that has been set aside for this purposes is a positive development.
In respect of the financial services sector, the government reaffirmed its commitment to increase Hong Kong’s competitiveness and attractiveness, including allowing private equity funds to enjoy the profits tax exemption available to offshore funds, and providing a legal framework for introducing an open-ended fund company structure. Following up on the plan to develop Hong Kong as a treasury hub announced last year, the Financial Secretary indicated that profits tax deductions for interest expense will be allowed for qualifying corporate treasury centres and that there would be a 50 percent reduction to in the profits tax rate for specified treasury activities. KPMG China believes these measures better position Hong Kong as an international hub for private equity and as an asset management centre.
KPMG China supports the government’s plan to amend respective laws and regulations, and to launch initiatives that boost Hong Kong’s soft skills. The three-year pilot scheme for insurance and asset and wealth management services, which aims to train up more talented individuals, could help address the manpower shortages in these sectors, enhancing long-term development by tackling the problem at the root.
Another encouraging measure is the promotion of Hong Kong as a premier intellectual property (IP) trading hub providing high value-added IP services in the region. KPMG China believes that extending the scope to cover more types of IP rights eligible for tax deductions at acquisition can provide a more attractive environment for the sector and stimulate business.
The Financial Secretary also agreed to establish a Future Fund and to continue exploring the feasibility of broadening the tax base in order to find a solution for stabilising government revenue and creating room for direct tax concessions. KPMG China views this favourably, as Hong Kong should avoid relying on the current narrow tax base and should look into different possibilities to prepare for the potential problems and structural deficits associated with an ageing population.
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KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 162,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG China has 16 offices in Beijing, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR, with around 9,000 people.
KPMG China refers to the member firms of KPMG International in Mainland China, Hong Kong SAR and Macau SAR.