Tax break urged to lure foreign corporates

Foreign firms setting up regional headquarters in Hong Kong, particularly in the hi-tech, finance and logistics industries, should pay half the tax other corporations do to promote economic growth and create employment, a professional accountants' body says.

The Association of Chartered Certified Accountants Hong Kong is expecting a budget surplus of up to HK$40 billion this financial year, the upper end of many accountants' estimates.

Financial Secretary Henry Tang Ying-yen will deliver his budget speech tomorrow.

'These foreign companies can be offered a preferential tax rate of up to half the current corporate tax rate, or 8.75 per cent, to enhance the city's competitiveness,' the co-chairman of the association's tax subcommittee, Fergus Wong Wang-tai, said.

The government already extended this preferential tax rate to companies conducting reinsurance business abroad, as well as companies trading bonds recognised by the Hong Kong Monetary Authority, he said.

Singapore recently announced that it would cut its corporate tax rate to 18 per cent from 20 per cent from April next year.

The move is expected to cost the government an estimated S$800 million (HK$4.08 billion) extra a year.

If there is room for further adjustments to the tax regime after preferential tax rates, the association believes the government should consider lowering profits and salaries tax over a number of years.

Mr Wong said the economy was healthy and the government should lean more towards cutting tax rates rather than one-off tax rebates.

He also proposed deducting child education expenses from people's tax payments on top of the child allowance - capped at HK$30,000 a year depending on a child's age.