Tax incentives urged for growth
This year's Budget should offer a range of tax incentives for business as part of a concerted effort to kick-start the economy, four tax experts at leading accountancy firm Deloitte Touche Tohmatsu said yesterday.
With the Government having already ruled out tax cuts for the Budget on March 3, Deloitte's partner in charge of Hong Kong and China tax services Yvonne Law Shing Mo-han said the best hope was for a series of measures to spur investment and assist existing business.
The priority was to reduce production costs, to encourage industry-driven research and development and to attract foreign investment, she said.
Among Deloitte's suggestions were the introduction of manufacturing allowances, interest-free loans for research and development and a 150 per cent tax write-off for the acquisition of manufacturing equipment.
Another partner, Anthony Tam Chun-hung, said while Hong Kong's income tax rate was substantially lower than its biggest competitors as the region's pre-eminent financial centre, places such as Singapore, Malaysia and Taiwan were becoming increasingly proactive in attracting business with tax incentives.
'Hong Kong's incentives - including the small enterprise loan scheme - do not go nearly far enough,' said Mr Tam.
Deloitte also suggested a profits tax exemption on management fees for services rendered to overseas associates. The abolition of share capital duty was also recommended.
Tax partner Kaiser Kwan Kim-fung also advocated a one-off 200 per cent tax write-off for computer expenditure related to year-2000 compliance.
Deloitte forecast a budget deficit of $50 billion in this financial year running to March 31, with economic growth of minus 2 per cent this year.
The deficit would fall to $20 billion next financial year, before a recovery came in the 2000 to 2001 financial year, the firm forecast.
Another of Deloitte's experts, Joseph Wong Wai-leung, said a budget deficit was understandable given the economic circumstances.
'I think the whole idea is that the budget deficit is not encouraged but we do have good reserves and this is a crisis,' said Mr Wong.
'We should look to one year, but it should definitely not last more than three years.' The firm also repeated its call for a single profits tax rate of 15 per cent.
