The Government has been urged to offer a 50 per cent profit-tax concession to fund managers and trustees to enhance Hong Kong's appeal as a regional base and beat back a challenge from Singapore. The move would reduce the effective tax rate on fund managers to 8 per cent - below the 10 per cent offered by Singapore. 'It would help to prevent fund managers shifting their business from Hong Kong to Singapore,' said Hong Kong Society of Accountants (HKSA) taxation committee chairman Tim Lui Tim-leung. Mr Lui said Singapore had offered the 10 per cent rate to attract fund managers and trustees to operate in the island republic. The fund-management industry was an important sector in Hong Kong, which brought business to local banks and brokerages, he said. The HKSA made the call in its 1999-2000 Budget submission to Financial Secretary Donald Tsang Yam-kuen early this month. The society also urged the Government to cut profit tax from 16 per cent to 15 per cent and rates from 4.5 per cent to 3.5 per cent. Mr Lui believed the profit-tax cut would cost the Government $1.8 billion and the rates cut about $3 billion. 'Although the local deficit for the year is expected to reach $40 billion, the Government still has strong fiscal reserves to support a tax reduction,' Mr Lui said. 'The HKSA believes that a moderate tax cut and tax concessions can play a useful role in positioning Hong Kong for recovery and for successful future development.' He opposed any rise in taxes to cover the SAR budget deficit as 'this is not the time to take money out of the pockets of businesses and consumers by increasing rates of taxation'. The HKSA suggested this year's profit tax bill be paid in two equal instalments of 50 per cent each, rather than the usual arrangement of 75 per cent in the first instalment and 25 per cent in the second. This would allow businesses to retain money for several months longer, Mr Lui said. The HKSA suggested increasing the personal allowance by about 6.5 per cent. It also suggested widening the marginal tax bands from $35,000 to $40,000. It proposed giving a 150 per cent tax reduction to employers for the first-year costs of employing staff from retraining schemes.
