Changes to taxes threaten HK edge

PUBLISHED : Tuesday, 27 February, 1996, 12:00am
UPDATED : Tuesday, 27 February, 1996, 12:00am

IT is uncertain if Hong Kong businessmen will regain their competitive edge in China in the long term after recent changes to the mainland taxation system, according to China and Hong Kong Economic and Trade Association president Eddy Li Sau-hang.

'It is sure that they [tax changes] will do more harm than good in the short term,' he said.

'Whether Hong Kong businessmen can regain their competitive edge in the long term really depends on their efforts.' Mr Li said the scrapping of tariff exemptions on imported machinery would raise production costs for Hong Kong-funded businesses producing goods on the mainland.

He said tariff cuts would lead to cheap imports of foreign goods, increasing competition for Hong Kong businesses selling on the China market.

Mr Li said the tariff reduction might sound attractive to Hong Kong businesses importing foreign-made goods into China, it was important to clarify the basis of the tariff calculation.

'Before, how you calculated the tariff was really up to how you reported the price of an imported item,' he said.

'But it is unclear on what basis [Chinese] customs are going to calculate the tariff.

'Although the tariffs were cut, it is uncertain how much we should pay.' China announced tariff cuts on more than 4,900 items, with the average rate dropping to 23 per cent from 35.9 per cent.