Four practical ways for Hong Kong to help its business start-ups
Mike Rowse welcomes the government’s plan to give small and medium-sized enterprises a lift, but thinks the focus on profits tax reform is misguided
Reform that will see HK$5 billion in tax breaks for start-ups and small businesses to go before Legislative Council in 2018
Lam has already indicated the main purpose will be to help small and medium-sized enterprises flourish. As the owner or part-owner of four SMEs, perhaps I can offer a few observations on how the resources could best be deployed.
First, I must confess to being puzzled by the proposed priority on introducing a two-tier profits tax regime, with a suggested lower rate for companies’ profits below HK$2 million. The main challenge for SMEs, particularly in the start-up phase, is in achieving profitability at all. Expenditure is being incurred and strenuous efforts are being made to secure revenue, with the result that would-be entrepreneurs can feel like gerbils on a treadmill. The basic issue is survival of the company, and little or no thought is given to the level of profits tax. Make the profit first, before worrying about whether the tax will be 10 or 20 per cent, or some figure in-between.
‘Make bigger companies pay more tax to ease HK$5 billion revenue loss from proposed reform’
One way in which expenditure could be reduced would be to lower the annual Business Registration Certificate fee to a nominal amount – say HK$20 instead of the current HK$2,000-plus for the first few years.
Similarly with the requirement to produce proper accounts and get them audited, and file necessary returns. There are a multitude of service providers who can perform these tasks relatively cheaply but, for a start-up, it all represents money out of the door with no return. Could SMEs be given a professional services allowance for the first three years to help meet these costs? Some support on IT and basic office systems could be included.
Business accommodation rental is another huge concern for SMEs. Many professionals keep costs to a minimum at the outset by working from home. But this is not always a feasible option. Some help is available, especially for hi-tech companies, but could the scope be expanded? Could the government bulk-lease office and workshop space and let it out to SMEs at peppercorn rents for the first few years of operation?