THE Government is reconsidering the question of taxation treaties after complaints that the territory is losing out to rivals offering more flexible tax regimes. A government spokesman said the Government realised there were some advantages to double-taxation agreements and was looking at the issue. His comments follow criticism of Hong Kong's taxation environment, amid complaints that Singapore is one rival scooping Hong Kong business through tax advantages for banks basing treasury and market-making operations there. One executive with a large German bank said double-taxation agreements between Singapore and Germany offered substantial benefits. A German company remitting US$10 million in profits to Germany after paying Hong Kong tax of 16.5 per cent, has to pay 50 per cent in German taxes - although it can offset its Hong Kong tax. The same company remitting $10 million from a base in Singapore or Labuan in Malaysia does not have to pay tax in Germany. Bankers said Singapore also offered tax benefits plans or relief from offshore capital market operations. Chemical Securities Asia was reportedly one defector to Singapore, while ABN-AMRO had also considered moving its regional treasury to Singapore, bankers said. The spokesman said that Hong Kong's territorial basis of taxation, combined with unilateral relief provided by many countries for Hong Kong tax meant 'double taxation is generally not a practical problem for us'. 'However, the Government recognises that there may be wider economic benefits arising from double-taxation agreements and is reconsidering the issue,' the spokesman said. Financial Services Secretary Michael Cartland earlier defended the taxation regime, saying Hong Kong's tax rate was low and the economy robust. He said financial services were a vital component of the Hong Kong economy, accounting for about 10 per cent of gross domestic product. The tax environment was one of the 'key factors' contributing to Hong Kong's economic success, Mr Cartland said. The Government spokesman said Hong Kong had only one taxation agreement, an arrangement with the United States covering shipping. The spokesman said Hong Kong could enter into double-taxation agreements under the Inland Revenue Ordinance, but technical amendments to the ordinance might be needed. 'For example, in the case of double taxation agreements covering airline profits, an amendment would need to be made to the ordinance to enable us to tax the profits of Hong Kong airlines earned in an agreement country, and which had been granted full relief by that country,' he said. 'Otherwise the profits would be tax-free.' Solicitor Philip Marcovici, now based in Switzerland, raised the issue of double taxation when he was in Hong Kong. He cited the US, which imposes a 30 per cent withholding tax on dividends, interest and royalties paid to non-residents. Standard Chartered Bank, operating in Hong Kong as a branch of a British company can take advantage of the tax treaty between the US and Britain. This means a US borrower paying $100 worth of interest to Standard Chartered deposits $100 in the bank, but Hong Kong-incorporated Hongkong Bank only receives $70, with $30 being withheld at source for payment to the US Treasury.