New city leader Carrie Lam puts tax reform at the top of her agenda
Chief executive-elect says lowering the levy on profits will boost Hong Kong’s competitiveness
Chief executive-elect Carrie Lam Cheng Yuet-ngor plans to host a summit on a new direction for taxation in Hong Kong to find ways to spur economic growth as soon as she takes office in July.
Giving her first public speech after winning the election on Sunday, Lam told local and foreign investors at the Credit Suisse Asian Investment Conference on Tuesday she would work hard to keep Hong Kong competitive.
“It’s not all rosy. Unfortunately we have lost a few regional company headquarters to another place,” she said. “There is no place for complacency.”
Changes in taxation would form a major part of her economic blueprint, the city’s next leader said.
“My new tax philosophy is not exactly ‘the more, the merrier’. Sometimes collecting less is highly desirable,” she said.Lam said she would implement the two major tax proposals pledged in her manifesto. The first is a two-tier profits tax system that seeks to reduce the burden on small, medium and start-up enterprises. The tax rate for the first HK$2 million of profits will be lowered from the current 16.5 per cent rate to 10 per cent.
In the second proposal, the new administration will offer additional tax deductions to boost research and development, and possibly spending on environmental protection initiatives, art and design, and other initiatives.
A summit on a “new taxation direction” would be held as soon as she took office, she added.
Another tax-related measure aims to secure more “avoidance of double taxation agreements” with other regions or countries. Hong Kong had 37 such treaties, while Singapore had close to 90, she noted.
In a question-and-answer session, participants drew Lam’s attention to the city’s population growth compared with neighbouring cities and alluded to its competition with Singapore.
Lam said land and labour shortages remained the two “bottlenecks” to population growth. She vowed to find ways to increase land supply, and work with both employers’ groups and trade unions to import foreign labour for certain industries.
Asked how she would convince companies to move their regional quarters from Singapore to Hong Kong, Lam cited livability, freedom, the “spiritual side of life” of the city, and increasing transport connectivity with the mainland. She also said her proposed tax incentives would be appealing to companies.
Willy Lin Sun-mo, a deputy chairman of the Federation of Hong Kong Industries, said he agreed that importing labour for sectors such as construction should be a priority for the next administration. He also said Lam should consider further options to encourage the development of the innovation industry.
For example, work permits or even permanent residency could be granted to university students who are capable of running a start-up, he suggested.