Wednesday 25 February 2015
CPA Australia describes as lacking "detail and vision"
“With such a high budget surplus of HK$63.8 billion, we were expecting the Government to provide more support to the business community and the people of Hong Kong. Instead, we have a budget that lacks detail and vision,” said Loretta Shuen, Chairperson of the Taxation Committee, CPA Australia – Greater China, in response to Financial Secretary John Tsang’s 8th budget address.
“While we welcome the Financial Secretary’s acknowledgement to broaden the tax base, he needs to be much bolder and introduce specific policy directives. We have been calling for a comprehensive review of Hong Kong’s tax system since 2012, the government now needs to announce an immediate action plan and timeline.”
We made the below observations on today’s Budget Address:
Personal Tax Relief
“We are pleased to see the increase in child allowance to HK$100,000, which is in line with our recommendation to the Government earlier this month. However, with the pressures surrounding our aging population we were hoping to see an increase in the dependent parent allowance and elderly residential care expenses by 50 per cent. To reduce pressure on escalating public healthcare costs, we want the Government to introduce a tax deduction for the actual amount paid on the Voluntary Health Insurance Scheme subject to a cap to HK$20,000 per person insured and for all dependents’ policies capped at HK$100,000 paid by a taxpayer.”
“With so much uncertainty over the Eurozone economy, a potential increase in US interest rates and a weak domestic economy, we believe that while the support provided to SMEs in this budget is positive, more should have been done to boost the confidence of Hong Kong’s SME sector. In view of these unpredictable and external market forces, we believe the Government should be reducing the profits tax rate for SMEs to 13.5 per cent and allowing SMEs to carry back losses for two years.”
Innovation and Technology
“We welcome the government’s proposal to inject $5 billion to the Innovation and Technology Fund to strengthen support for relevant enterprises. However, we would like to see further tax incentives including introducing a super deduction of 200 per cent in training, R&D, equipment and machineries for a period of two years for environmental and technology start-up companies. In addition, the Government should consider providing a three-year tax holiday beginning when companies start to generate assessable profits.”
RMB and Asset Management
“We support the government’s discussions to increase the investment quota for the RQFII scheme that would support the continued growth of RMB trade settlement and bond issuance services to further consolidate Hong Kong as the world’s leading offshore RMB settlement centre. We also welcome the proposed tax incentives to attract corporate treasury centres to Hong Kong.”
Saving for the future
“We are disappointed that there is no measure to address housing affordability. The Government may consider a further tax deduction for voluntary contributions to the MPF Scheme by employees, which would be capped at 15 per cent of assessable income or HK$180,000 per annum. This does not only encourage savings for retirement, but allows a one-time withdrawal of the voluntary contributions from the Scheme for taxpayers to purchase a primary residence in Hong Kong, and recoup tax deduction if, within 36 months of the withdrawal from the Scheme, the taxpayer stops residing in the property or sells it.”
“Root and branch” tax reform
“We are pleased to hear that the Government will explore the feasibility of broadening the tax base and reconsider GST, however, there is no timeline and an action plan. We urge the Government to undertake immediate action to review and reform the tax system and start conducting a comprehensive “root and branch” review to help ensure Hong Kong’s future growth and prosperity.”
CPA Australia is one of the world's largest accounting bodies with more than 150,000 members globally. It has established a strong membership base of more than 16,000 in the Greater China region.
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