A major increase in profits tax is not feasible as it would undermine SAR businesses' competitiveness, according to the advisory committee.
It also warned that introducing a progressive scale for the rich to pay more might encourage large firms to break themselves into smaller subsidiaries.
According to the committee, a one percentage point increase in profits tax would reap $2.6 billion annually.
But Moses Cheng Mo-chi, head of the committee, said it would be against the international trend of lowering existing taxes. He said the current 16 per cent rate for corporate profits already constituted about one-third of the SAR's tax revenue, compared to an average nine per cent in Organisation for Economic Co-operation and Development countries, and 29 per cent in the Asia-Pacific region.
'The proposal would not broaden the tax base. It only means the Government would depend even more on a limited source of revenue,' he said.
Another committee member, Lui Tim-leung, said: 'We are not saying there is no room for increases. But our competitiveness will disappear if the percentage was to rise above 20 per cent.'
