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HKICPA calls for tax measures to enhance competitiveness amid challenging outlook

28 January 2019

(Hong Kong, 28 January 2019) The Hong Kong Institute of Certified Public Accountants (HKICPA) today shared its tax-related recommendations for the 2019-20 Budget, which will be announced on 27 February 2019. Under the heading "Rising to Challenges and Staying Competitive", the Institute’s budget proposal focuses on tax policies and measures on the revenue side of the budget.


Hong Kong’s fiscal reserves stood at HK$1,102.9
Billion at the end of March 2018. HKICPA estimates that the fiscal surplus for 2018/19 will reach HK$50 Billion at the end of March, and the fiscal reserves will increase to over HK$1.15 Trillion. These projected figures are similar to the government's budgeted position.

 

Investing in a review of Hong Kong's tax system

 

This year, HKICPA reiterates its view that there needs to be an extensive review of the tax system to support Hong Kong's competitiveness, against the background of a changing business environment and a tax system that is becoming progressively less simple.

 

Hong Kong used to enjoy the advantages of a low tax rate and simple system. However, the city’s tax system has become much more complex in recent years. Meanwhile, many jurisdictions have been reducing their corporate tax rate, putting more emphasis on indirect taxation, whereas Hong Kong's headline profits tax rate has remained unchanged at 16.5%. Governments around the world are also taking steps to simplify their tax regimes.

 

"The Financial Secretary Paul Chan has indicated his preference for driving economic development through specific tax policy measures instead of lowering the general profits tax rate. Various incentives will be used to promote the development of different industries, which will make Hong Kong’s tax system more and more complex. With the  international tax developments that are also affecting Hong Kong and the needs of a dynamic business sector, with new business models, a comprehensive review of the tax system is called for, in order to ensure that Hong Kong can maintain its competitive edge in the long term,” said Mr. KK So, Chairman of HKICPA's Taxation Faculty Executive Committee.

 

HKICPA believes that to remain a leading location for investment in a global marketplace and to maintain an efficient tax system, Hong Kong should be reviewing not only the headline tax rates, but also the existing preferential treatments and tax incentives, to evaluate whether they are achieving their objectives and are cost effective. Given the importance of continuing to develop Hong Kong's infrastructure and economy, and addressing challenges such as an ageing population and increasing healthcare costs, a more detailed study of options to broaden and stabilise the tax base should also be undertaken.

 

"The government's tax policy unit has successfully completed its initial tasks of helping implement the two-tier tax system and the super-deductions for research and development (R&D), proposed by Chief Executive Carrie Lam. It should now expand its scope of work and expertise to consider more fundamental issues, such as looking into tax policies needed to support Hong Kong's long-term economic growth and infrastructure development," added Mr. So.

 

Hong Kong as a Smart City

 

Taking a broader view of Hong Kong as a Smart City, the HKICPA calls for several specific measures.

 

HKICPA welcomes the introduction of the R&D super-deductions, as a significant first step in the right direction of encouraging more R&D activities in Hong Kong. At the same time, the government should adopt a more flexible approach towards granting these additional deductions. Consideration should also be given to offering tax credits to support R&D by start-up companies, which may not be profitable in their early years and so be able to benefit from the super-deductions. Tax credits are made available to start-ups in a number of overseas jurisdictions.

 

While the government and regulators may still be ambivalent towards cryptocurrency business, including initial coin offerings, these activities continue to take place in Hong Kong. As such, HKICPA believes that the government needs to clarify the tax treatment of profit generated by these activities.

 

Turning to the efficiency of tax collection, Mr. Curtis Ng, Convenor of the Budget Proposals Sub-committee, HKICPA said "The digitalisation of tax administration around the world has been gaining momentum in recent years and some governments require taxpayers to file online. With the vision of building Hong Kong into a world-class smart city and improving efficiency, the government should embrace innovation and technology as widely as possible, including in tax administration." While HKICPA notes that some efforts are already being made in this direction, "We hope that the development of tax e-filing platforms can progress at a faster pace and with a clear timetable. This will help support Hong Kong's development as a business-friendly efficient, and smart city," said Mr. Ng.     

 

Improving roadside air quality and reducing greenhouse gas emissions

 

Tackling climate change is undoubtedly one of the most serious challenges currently faced by many cities around the world, and Hong Kong is no exception. "To reduce carbon emissions and improve roadside air quality, we recommend various measures including wider use of electric vehicles," said Mr. Ng.

 

However, the demand for electric vehicle charging stations cannot be met by the current supply. Therefore, HKICPA suggests introducing a scheme to provide a full refund of the vehicle first registration tax on electric private cars if the purchasers also arrange the installation of a charging station. At the same time, the existing incentive measures of the basic HK$97,500 exemption on the first registration tax, and the HK$250,000 exemption on a ‘one-for-one replacement’ of an electric vehicle for an old petrol vehicle, should also be retained.

 

"In addition, to further improve air quality in Hong Kong, the government should consider providing further incentives to speed up the early replacement of old diesel commercial vehicles with vehicles that meet the latest emission standards. This should have a very positive impact, as diesel-engine commercial vehicles remain the biggest cause of roadside pollution," said Mr. Ng.

 

HKICPA supports the introduction of electronic road pricing in busier areas, as a means of reducing localised road traffic congestion and improving air quality in those areas. It also sees the government's proposal to introduce an electronic tolling system for tunnels to be worth exploring, as it should help improve the traffic flow. Both these measures are suggested in the Hong Kong's "Smart City Blueprint".        

 

Introducing rental deductions and other community measures

 

“In the face of uncertainties and challenges in the year ahead, we hope to see more community measures from the government to relieve the impact of economic pressures on Hongkongers’ daily lives,” said Mr. Ng.

 

HKICPA's budget submission proposes a number of measures aimed at benefiting the community. These include measures to support employees to upgrade their job skills and improve their opportunities in the market and, given the continuing unaffordability of residential property for many people, a tax deduction of up to HK$100,000 annually for rental payments by taxpayers on their primary residence.

 

With the government promoting increased integration and collaboration between cities within the Greater Bay Area (GBA), it is expected that people will be commuting more frequently between Hong Kong and other GBA cities in future. “In view of the increasing mobility of Hong Kong taxpayers, the government should explore the feasibility of allowing the proposed rental deduction, or the home loan interest deduction to be claimed by taxpayers who may be working in Hong Kong while maintaining their primary residence elsewhere in the GBA,” said Mr Ng.

 

Other community measures proposed by HKICPA include a tax incentive to encourage more people to adopt a healthier lifestyle, which in the long run should help improve Hong Kong people's quality of life and reduce pressure on an over-burdened health service. 

 

For the business sector, HKICPA’s proposals include group relief and loss carry-back, as well as reviewing the restrictions on deductions for plant and machinery used in manufacturing outside of Hong Kong. "While these are long-standing requests, they reflect real business needs and would make Hong Kong more competitive," said Mr. So.          

 

HKICPA's Budget Proposals 2019-20 are available online at: https://www.hkicpa.org.hk/-/media/Document/APD/Gov-Budget/Budget_Proposals_2019-20_submission_190118.pdf

 

香港會計師公會建議稅務措施 提升競爭力應對挑戰

 

(香港,二零一九年一月二十八日)政府將於二零一九年二月二十七日宣佈二零一九至二零二零年度財政預算案,香港會計師公會今天就財政預算案發表稅務相關建議。公會的建議以「自強不息 迎接挑戰」為題,集中討論稅務政策及預算案收入方面的措施。

截至二零一八年三月底,香港的財政儲備為11,029億港元。公會估計,二零一八至一九年度財政盈餘於二零一九年三月底約達500億港元,而財政儲備將增至超過11,500億港元,預測數字與政府的預算相若。

 

投資於稅制檢討

 

於商業環境不斷變化,加上本港稅制日趨複雜,為鞏固香港的競爭力,公會今年再次提議本港需要對稅制作全面檢討。

 

一直以來,低稅率及簡單稅制是香港的優勢。然而,近年本港的稅收制度變得愈來愈複雜,而世界各地的政府也逐步簡化稅收制度。同時,許多國家地區紛紛降低企業稅率,並更倚重間接稅,而香港的整體利得稅稅率則維持於16.5%

 

公會稅務師會執行委員會主席蘇國基先生說:「財政司司長陳茂波曾表示傾向透過特定稅務措施,而非降低一般利得稅率帶動經濟發展。為推動不同行業的發展,本港採用不同稅務優惠,令香港的稅制變得相對複雜。由於香港需要與國際稅務發展、急速變化的商業環境衍生的新商業模式接軌,公會建議本港要全面檢討稅制,確保香港能維持長遠競爭優勢。」

 

公會相信,香港要在全球市場中作為首選投資地並維持高效的稅制,本港在檢視整體稅率的同時,亦應檢討現行稅務優惠條例是否達到原來訂立的政策目標及具成本效益。此外基建和經濟發展,應對人口老化和醫療成本增加為香港公共財政帶來不少壓力,因此香港應就擴大和穩定稅基方案進行詳細研究。

 

蘇先生補充說:「政府稅務政策組已順利完成其首要任務,包括制定行政長官林鄭月娥所提出的兩級制利得稅及研發活動額外稅務扣減。現時應擴大稅務政策組的職能及專業範疇,探討其他基礎稅務事宜,例如着力透過稅務政策支持本港長遠經濟增長及基建發展。」

 

實踐智慧城市

 

香港作為智慧城市,公會從宏觀角度提出下列具體措施。

 

公會歡迎政府就研發提供額外稅務扣減並認同這是正確方向和重要第一步,能激勵企業及個人香港進行更多研發活動;然而,在扣減條款執行上應要更靈活處理。由於初創企業營運初年可能還在虧損狀態,而未能馬上受惠於額外稅務扣減,政府應考慮透過給予稅收抵退來支持這類公司的研發。不少國家地區亦有為初創企業提供稅收抵退。

 

儘管政府及監管機構對加密數碼貨幣業務(包括首次代幣發行)監管方向還未定調,此類活動在香港仍有進行。有見及此,公會認為政府有必要釐清相關活動收入的稅務處理。

 

至於稅收徵管效率方面,公會財政預算案建議委員會召集人伍耀輝先生表示:「近年全球各地的稅務徵管愈趨電子化,有些政府規定納稅人網上進行稅務申報。香港銳意成為世界級的智慧城市及提升效率的同時,政府應在不同層面,包括稅收徵管上,大力及廣泛應用創新科技。」儘管公會注意到本港這方面的努力漸見成果,伍先生表示:「我們希望稅務電子申報平台能加快發展,並定下明確時間表。這有利香港發展成一個商業配套完善、高效的智慧城市。」

 

改善路邊空氣質素 減低溫室氣體排放

 

應對氣候變化無疑是眾多城市當前的難題,香港亦不例外。伍先生說:「我們建議採取多項措施,包括鼓勵更廣泛使用電動車,藉以減低碳排放、改善路邊空氣質量。」

 

然而,目前電動車充電站供不應求。因此,公會建議為同時安裝認可充電站的電動私家車購買者,提供全額退回汽車首次登記稅的計劃。與此同時,應保留目前豁免首次登記稅(即97,500港元)和「一換一」計劃以舊汽油車更換電動車的登記稅寬減額(上限為25萬港元)的鼓勵措施。

 

伍先生說:「由於柴油商用車仍是路邊空氣污染最主要排放源頭,為進一步改善本港空氣質素,政府應考慮提供更多激勵措施,鼓勵加快將舊柴油商用車更換成符合現行排放標準的型號。此舉應能為減低路邊空氣污染帶來積極作用。」

 

公會支持在交通繁忙地區實行電子道路收費,以減輕地區交通擠塞及改善空氣質素;而政府建議為隧道引入電子收費系統應有助改善交通,值得深入探討。這兩項措施均列於 《香港智慧城市藍圖》內。

 

租屋扣除額及其他民生措施

 

伍先生說:「來年環境複雜多變,我們希望政府推行更多利民紓困措施,減輕經濟壓力對香港市民日常生活帶來的影響。」

 

公會於預算建議提出了多項惠及民生的措施,包括支持僱員提升技能改善就業機會的措施。另外,有見普遍市民住屋租金負擔日益沉重,我們亦建議政府就納稅人的主要居所提供每年最高10萬港元的租金支出扣除額。

 

隨着政府推動大灣區內城市融合,預期未來香港及其他大灣區城市的人口雙向流動會更見頻繁。伍先生說:「本港納稅人的流動性愈來愈高政府應進行可行性研究,為在香港工作而主要居所在大灣區其他地方的納稅人,提供上述建議的租金扣除額或居所貸款利息扣除安排。

 

公會建議的其他民生措施包括有助鼓勵市民建立健康生活的稅務優惠,從而長遠提升香港市民的生活質素,並減輕對已過度負擔的醫療服務造成壓力。

 

公會亦建議了其他商業措施,包括引入集團稅務虧損抵免及容許稅務虧損抵扣往年應課稅收入的安排,以及檢討在香港以外地方使用的工業裝置及機械的折舊扣稅額限制等。蘇先生說:「這些建議關乎商界長期以來的訴求,反映真正的營商需要,措施將有助增強香港競爭力。」

 

公會的二零一九至二零二零年度財政預算案建議全文已上載 https://www.hkicpa.org.hk/-/media/Document/APD/Gov-Budget/Budget_Proposals_2019-20_submission_190118.pdf,以供參閱。

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