Legco filibuster on stamp duty puts more than HK$4b at stake, lawyers warn
Homebuyers' cash being held by lawyers while stamp duty bill is delayed in Legco
Billions of dollars paid in property transactions have been put at risk by a delay in passing a law that enacts a doubling of stamp duties, lawyers warn.
Conveyancing lawyers are holding the extra taxes they have collected from property buyers until the law is passed and the money is handed to the government, or returned to buyers if legislators veto the market-cooling measure.
But buyers would have to pay the levy again if law firms holding their money went bust or misappropriated the funds, the lawyers said. Deacons senior partner Lilian Chiang called the situation "very unsatisfactory".
"It has been worrying since the tax started to be collected in February 2013," she said.
"We don't know the exact amount being held by law firms, but it will not be a small figure. What will happen if the tax money goes missing or if some 'small' law firms are forced to close down? At the end, buyers are vulnerable."
Government figures show lawyers are holding on to HK$4.3 billion from 3,000 transactions as of February this year. They will hand the money to the Inland Revenue Department once the bill is passed.
Louis Chan Wing-kit, managing director of Centaline Property's residential department, estimated the sum could have risen to HK$10 billion by now.
Property buyers were not sheltered by compulsory insurance against professional negligence, Chiang and other lawyers noted. The indemnity does not cover misappropriation or closure of the law firm.
On July 6, Financial Secretary John Tsang Chun-wah wrote on his blog that filibustering in the Legislative Council had delayed passing of the measure.
A large portion of the "enormous amount" of tax collected arose from purchases of non-residential properties, Tsang said.
"The spirit of the law includes certainty. The matter has been uncertain for way too long," Chiang said. "Clients are at risk and law firms find it burdensome. Although it is not common for clients' money to be misappropriated, it has happened in the past."
Law Society vice-president Thomas So cited a case last year in which a former senior partner of K&L Gates, Navin-kumar Aggarwal, was jailed for 12 years for an HK$8 billion fraud and money laundering scheme designed to pay off his huge gambling debts.
Chiang said the government should not have imposed the measure until the law amendment had been properly drafted and discussed. As the bill was drafted in a hurry without proper consultation, revisions continued to be proposed, resulting in uncertainty, she noted.
She dismissed suggestions that lawyers had been earning interest on the tax payments, saying the current interest rate was negligible and administrative costs were involved.
Yesterday, more than 1,000 people marched to condemn the filibustering and violence seen in Legco. Stanley Ng Chau-pei, chairman of march organiser the Beijing-loyalist Federation of Trade Unions, said the filibusters had wasted a lot of time in the legislature and obstructed the scrutiny of many bills.
Additional reporting by Jeffie Lam