15 per cent stamp duty
To rein in the city's runaway housing prices, Hong Kong's Financial Secretary John Tsang Chun-wah announced an additional 15 per cent stamp duty on non-permanent-resident and corporate buyers starting from October 27, 2012. The move prompted speculation over the effectiveness of taxation on the real estate market and criticisms that Hong Kong was turning away from its roots as a free market economy in favour of a more protectionist market environment.
CY Leung 'notified' Beijing before unveiling stamp duty
Colleen Lee, Gary Cheung and Olga Wong
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Chief Executive Leung Chun-ying confessed yesterday to phoning Beijing about a new stamp duty to be levied on non-local homebuyers in Hong Kong ahead of announcing the tax.
He said he was "notifying" Wang Guangya , director of the Hong Kong and Macau Affairs Office under the State Council, for the sake of "internal and external diplomacy" and denied he was seeking approval.
His admission came two days after Wang was cited by lawmakers as saying Leung had called to inform him of the new 15 per cent duty a day before it was unveiled in October.
It raised concerns that Leung could have breached the Executive Council's confidentiality rule and the principle of Hong Kong people governing Hong Kong, and that the information could have been leaked to investors.
"It was not a request for instructions … since the buyer's stamp duty is levied on non-local buyers, it is necessary to deal with internal diplomacy and external diplomacy," Leung said when asked about the telephone call he made on the night of October 25.
"Hence, after we decided to impose the buyer's stamp duty - after the decision was made - we notified the relevant party. This was because we need to deal with internal diplomacy and external diplomacy."
Financial Secretary John Tsang Chun-wah announced the 15 per cent stamp duty on non-locals and companies on the evening of October 26. It came into effect the next day.
A spokesman for the US consulate for Hong Kong and Macau said it had not been informed in advance of the introduction of the duty. He said representatives of the US and other foreign consulates attended an information session about the duty at the Transport and Housing Bureau on the day it was announced.
A source familiar with the government's operations said it was unusual for the administration to inform mainland departments about sensitive policies before they were announced.
"Even if senior Hong Kong officials want to seek the views of their mainland counterparts, they should consult mainland officials on whether there is any problem with options they are deliberating before a final decision is made, rather than asking mainland officials to clear any doubts before an announcement is made," the source said.
An executive councillor who asked not to be identified said the call should be seen as routine and nothing exceptional, saying the "notification" would not undermine the city's autonomy. The Chief Executive's Office said it had nothing to add when asked if Leung's move might infringe Exco's confidentiality rule.