Hong Kong is unlikely to scrap or reduce the stamp duty on stock transactions as the administration sees it as an effective tool against short-term trading, such as high-frequency trading, as well as combating the influence of dark pools.
Hong Kong has steadfastly resisted following the global trend of abolishing stamp duty, which amounts to 0.1 per cent of the value of the transactions. While the United States and Japan do not charge stamp duty, Britain, Singapore and mainland China do.
Institutional investors complain the duty increases trading costs for them while Hong Kong Exchanges and Clearing executives have repeatedly called for reducing or scrapping the duty altogether to boost trading volumes.
But according to the Secretary for Financial Services and the Treasury, Professor Chan Ka-keung, the duty should stay for its many advantages and its steadying influence on the market.
'The duty is also an important source of income for the government,' Chan told the South China Morning Post. 'The duty is a good regulatory tool as it adds to the costs for short-term speculators such as high-frequency traders. That is good for Hong Kong as that's not the kind of trade we want to attract.'
In the financial year to March this year, the government had collected HK$25.72 billion in stamp duty. In the preceding financial year, despite the financial crisis, the government collected HK$21.70 billion, representing over 10 per cent of total tax revenues.