HK urged to cut business costs
To retain its competitive edge among Asian cities, Hong Kong must cut its profits tax and reduce the cost of doing business, the General Chamber of Commerce says.
The chamber submitted these and other recommendations to Financial Secretary John Tsang Chun-wah for his budget next month after conducting a survey that found businesses felt the government had done insufficient long-term planning and were concerned about it.
The chamber said the city's competitive advantage over Singapore and Taiwan was dwindling because of increasing government intervention, such as the soon-to-be-implemented statutory minimum wage law and the competition law, which the government wants to pass.
These new regulations would increase the cost of doing business, the chamber's chief executive Alex Fong Chi-wai said. 'Rising social tension is also not making us appealing to overseas businesses any more.'
According to the World Bank, Hong Kong's effective tax rate ranks sixth among 15 Asian economies.
The chamber suggested cutting the profits tax to 15 per cent from 16.5 per cent.
'Now is the time for Chief Executive Donald Tsang Yam-kuen to live up to his promise during the election campaign that the tax be cut,' Fong said.
Singapore and Taiwan impose a corporate tax of 17 per cent, while South Korea's levy is 22 per cent.
Unlike in many other cities, tax losses in Hong Kong cannot be used to offset taxable profits in prior years or transferred between group companies.
As a result, companies were likely to face higher costs and less favourable cash flow, the chamber's chairman Anthony Wu Ting-yuk said.
Wu suggested that the government establish an independent task force to review the taxation system, which he said was simple but too narrow and inflexible.
The profits tax rate is 17 per cent in Singapore and Taiwan, and 22 per cent in South Korea
Hong Kong's tax rate is 16.5 per cent and the General Chamber of Commerce wants it reduced to: 15%