THE Government needs to clarify its stand on double taxation after 1997 to ensure that offshore banks do not decamp for other regional financial centres, according to a prominent German banker.
Volker Stoeckel, senior vice-president and general manager of the Hong Kong branch of Bayerische Landesbank, said even China had a better regime than Hong Kong's.
He said Hong Kong's lack of double-taxation agreements meant that German banks were, for tax reasons, shifting out of Hong Kong and were going into Singapore.
Hong Kong's tax regime was mentioned in a recent conference on the territory's future as a financial centre after 1997, but Mr Stoeckel said a low corporate-profits tax regime alone was not enough.
'The problem is that Hong Kong doesn't have any double taxation agreements with other countries. So banks, companies or private individuals are subject to tax in their home country for profits remitted out of Hong Kong,' Mr Stoeckel said.
A German company remitting US$10 million in profits to Germany after paying Hong Kong tax of 16.5 per cent, had to pay German taxes - Germany's taxes were close to 50 per cent - although it could offset its Hong Kong tax.
In contrast, the same company remitting $10 million from a Singapore or Labuan in Malaysia base did not have to pay tax in Germany, he said.