A nasty secret that some would rather like to keep just that!
Hong Kong frequently scores highly in surveys on economic freedom, ease of doing business and so on. This is greeted with much back- slapping and chortling by our leaders and the like of InvestHK. However the city recently featured prominently in one survey that the authorities may not be so pleased about. Hong Kong was recently ranked fourth on the 2011 Financial Secrecy Index published by the UK-based campaign group Tax Justice Network. The survey prefers the name 'secrecy jurisdiction' rather than 'tax haven', but it is essentially the same in that it 'provides facilities that enable people or entities to escape or undermine the laws, rules and regulations of other jurisdictions elsewhere, using secrecy as a prime tool'. The Tax Justice Network estimates conservatively that US$250 billion is lost in taxes each year to governments worldwide as a result of wealthy individuals holding their assets offshore.
The report notes that Hong Kong's high ranking in the survey is based on a combination of its secrecy score and a scale weighting based on its share of the global market for offshore financial services. Hong Kong, according to the survey, accounts for slightly over 4 per cent of that market, which makes it a large player but well behind others such as Luxembourg, the UK and the US. The report also notes that Hong Kong has for years served as 'a major round-tripping turntable for China (and for other countries)', whereby funds come out of the mainland and return masquerading as foreign investment. This shows up in Hong Kong's vast foreign direct investment flows. Inward FDI totalled US69.8 billion last year - to the delight of InvestHK, even though it masks all kinds of dubious capital flows such as round-tripping and transfer pricing. The report adds that 'large quantities of illicit capital flows are also being attracted to Hong Kong out of other developing countries, particularly those with increasing commercial ties to China'. However, given that these cosy arrangements seem to suit various vested interests in Hong Kong, don't expect much to be done about them in the short term.
Where to now for HSBC?
There has been another outburst of speculation in the British press on the prospects of HSBC relocating its headquarters. The latest round has been triggered by remarks by Lord Myners, the former City minister, who suggests that HSBC should move its UK retail banking operations to Paris and avoid the repercussions of the Independent Commission on Banking's final ring-fence. Speaking at a discussion organised by the Association of Corporate Treasurers last week, The Daily Telegraph reports Myners said: 'I've said HSBC would want to consider, or I suspect will consider, moving its holding company. If I was the director of HSBC, I would simply cease to do business in the UK through HSBC plc, which is the old Midland bank, and I would instead do it through CCF, their French bank, which can be passported into the UK and thereby avoid all the extra capital requirements that [Sir John] Vickers [chairman of the Independent Commission on Banking] is putting on me, and also avoid the UK bank levy.' Moving to Hong Kong is one thing, but moving to Paris to dodge British regulations would, surely, be unthinkable.
Time for a holiday from surveys
For all the talk of the importance of the work-life balance, a surprisingly high number of professionals do not take all their leave. In another of these dizzy surveys that headhunters serve up to draw attention to themselves, Robert Walters says that some 67 per cent of Hong Kong professionals do not take full leave entitlements.
The survey finds that 39 per cent took between 50 per cent and 75 per cent, while 27 per cent took between zero and 25 per cent of their allowance. However, the strain of co-ordinating these global surveys appears to have been too much for Robert Walters. On its Singapore site it says that 67 per cent of finance professionals don't take all leave. 'The figures reflect that Singaporeans do not have a strong work-life balance, unlike countries such as Italy and Australia.' On its Australian site, though, it says: '.....Australian professionals used less of their annual leave entitlement than any other nationality, with just 41 per cent of respondents using over 75 per cent of their annual leave allowance in 2010.'.
Globally, 40 per cent of the 8,890 surveyed in 19 countries took all of their leave. The countries with the highest percentage of professionals taking all their holiday allowance were Thailand (57 per cent), Germany (56 per cent), Ireland (56 per cent), New Zealand (54 per cent) and the UK (54 per cent).