Chamber cries foul over stamp duty rise
British organisation says the doubling of tax on property purchases will badly affect the growth of small and medium-sized companies in city
The British Chamber of Commerce in Hong Kong said the doubling of stamp duty on the purchase of commercial properties would be harmful to the growth of small and medium-sized enterprises.
The organisation represents more than 500 companies which employ 10 per cent of the workforce in the city and its members include HSBC and Swire Pacific.
It said the increased property levy also would weaken the city's competitiveness when it came to attracting overseas investment.
"Small to medium-sized enterprises are the backbone of Hong Kong's economy," said Timothy Peirson-Smith, the chairman of the chamber's business policy unit.
"As SMEs grow, they have traditionally made non-speculative investments in Hong Kong property for their own use as offices for their operation.
"It is a good reinvestment back to Hong Kong."
The higher stamp duty will also affect international investors who plan to buy commercial property for their expansion.
"It will hurt the business community and overall competitiveness of Hong Kong," Peirson-Smith told the South China Morning Post.
He said the chamber last week submitted its view to the Legislative Council's Bills Committee that was set up to study the Stamp Duty (Amendment) Bill 2013.
The bill seeks to adjust the doubling of stamp duty on the purchase of residential and non-residential properties.
On February 22, the government announced an increase in tax on property sales exceeding HK$2 million to rein in speculation.
Foreign companies say they have been unfairly targeted by the tax move, which greatly increases their business costs.
The doubling of the stamp duty will apply to commercial properties sold on or after February 23.
Top bracket sales of more than HK$20 million will see the tax rise to 8.5 per cent of the property value from 4.25 per cent.
"The inclusion of all non-residential purchases in doubled stamp duty labels every prospective business that wishes to acquire its office accommodation as a speculator, and that is simply not the case," said Peirson-Smith.
Because of the increase, Canadian insurer Manulife (International) faces payable stamp duty of HK$382.5 million instead of HK$191.25 million when it paid HK$4.5 billion for the West Tower at One Bay East in Kwun Tong last month.
If the bill passes, the insurer will have to pay an extra HK$191.25 million tax for the tower, which is for its own use.
The Canadian Chamber of Commerce, which represents 108 firms including Manulife (International), has written to the Legislative Council, urging the government to grant an exemption to long-term buyers of office space for their own use.
Manulife said in a written reply to the Post that "while we support measures taken to control property speculation, we believe that it is detrimental to the best interests of the development of Hong Kong to penalise long-term investors buying real estate for sound commercial reasons".
"This is Manulife's first significant real estate acquisition in Hong Kong. The deal was signed on March 15. One Bay East West Tower will be named Manulife Tower," it said.
When completed, the insurer said Manulife Tower would house most of the company's operations in the city.
The 21-storey development is expected to be completed by the end of 2015.
Manulife now occupies about 500,000 square feet of space at Manulife Financial Centre in Kwun Tong and several hundred thousand square feet of offices in Causeway Bay and Jordan.
Last Friday, the bills committee's members said the government had not thought carefully enough about the proposal and that such heavy-handed taxation could hurt the city's image as a financial centre.
Committee chairman Starry Lee Wai-king said 14 groups had registered to express their views on the bill later this month.