Time to fix glaring loophole in Hong Kong's property stamp duty
A loophole in the new stamp duty has created the impression that it's one rule for the rich and another for the rest of us.
As one of its cooling measures to calm the red-hot property market, the government has introduced a bill which enables the doubling of the stamp duty of flat sales worth more than HK$2 million for buyers who already own at least one property. The only exemption is for those who are permanent Hong Kong residents who don't own a flat.
The bill, however, is still stuck in the legislature, though lawyers have been withholding the extra stamp duty. The problem is that there is a glaring loophole in the Stamp Duty Ordinance. It has come to light in recent weeks, partly because transaction volume has picked up again after a period of calm, and some sales are raising eyebrows.
There have been cases of multiple flats being purchased in one go at luxury estates such as the yoo Residence in Causeway Bay, the Cullinan atop the Kowloon MTR station and The Avenue, a new project in Wan Chai. In each case, the buyers just paid the old stamp duty because the flat purchases were counted as a single transaction. The Financial Services and Treasury Bureau has confirmed the validity of the sales, but the government refused to comment. Despite full knowledge of its existence, officials appear unwilling to do anything about it.
Critics, however, have pointed out the obvious: this rather large loophole defeats the purpose of the government's own cooling measures to crack down on rampant property speculation.
One reason for the officials' reluctance to amend the bill and close the loophole is that they already have a nasty fight on their hands, with many pro-business lawmakers fighting against it. That's why it has been lingering in the Legislative Council's bills committee, with no end in sight to its passage despite being tabled in May. So far, it has been having an effect on flat sales because the doubled stamp duty is retroactive. It's not clear whether the government knew about the problem from the start or only afterwards. Either way, it is counterproductive to leave the loophole unchanged.
It is also unfair, as it obviously favours buyers with deep pockets. They are the kind of people who have the resources to play the property market. Despite the difficulty, it's time for the government to bite the bullet, acknowledge the shortcomings of the bill and work to rectify the problem.