The government should introduce group tax relief, cut corporate taxes and simplify tax reporting procedures for small and medium-sized enterprises to strengthen the city's competitiveness, according to the new chairwoman of the Hong Kong General Chamber of Commerce.
Lily Chiang Lai-lei said corporate tax should be cut to 16 per cent - the level that applied in 2002-03 - as soon as possible. It currently stands at 17.5 per cent.
'The tax was increased when the government faced a lot of financial difficulties,' said Dr Chiang. 'The government should return the wealth back to the business sector when the fiscal situation is good. It did not do so in this financial year, so it should get this done next year.
'The chief executive has pledged to cut profits tax to 15 per cent by the end of his new term. It will be very good if he can deliver that,' she said. 'Singapore has slashed profits tax to 18 per cent. They are now catching up and we have to do something.'
Dr Chiang said group tax relief, which would make it possible for profits reported by parts of the same group of companies to be offset by losses in others, is important to the city's competitiveness. 'This has been introduced in many foreign countries. Adopting group tax relief could encourage more foreign firms to invest in Hong Kong,' she said. 'I believe the government will not suffer any financial loss in the end.'
She said the existing tax reporting procedures were too complicated for small firms. 'Companies with turnovers of [HK]$1 million a year are doing the tax return in the same way as a corporate making [HK]$1 billion a year. Simplifying these procedures can significantly reduce their operating cost.' The chambers would push hard for these tax reforms in the coming year, she said.