Council calls for tax and regulatory changes to boost Hong Kong’s status as a centre for booking financial transactions
The government’s Financial Services Development Council has proposed changes to regulations and taxation arrangements in a bid to encourage more international financial institutions to book their business in Hong Kong, saying the city was losing out to London and New York and also faced regional competition from Singapore and Tokyo.
“We support Hong Kong in becoming a key booking centre, which will bring about more economic activities and create jobs here,” council chairwoman Laura Cha Shih May-lung said on Wednesday. “Hong Kong, at the very least, must encourage booking of transactions with a Hong Kong nexus or connection, especially with respect to China-related transactions.”
Financial firms which operate globally or regionally usually choose a city as their booking centre to enter into contracts for financial products, deliver payments and open and maintain accounts for their clients. London and New York are now the favourite booking centres, while Tokyo and Singapore are big booking centres in the region. Hong Kong is not seen as an ideal booking centre because its regulations and tax laws do not offer any incentives for such activities.
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“The increased asset allocation, liquidity and volume of transactions will not only translate into significant financial revenues for Hong Kong, but will also promote job creation in the areas of financial operations, risk management and compliance,” Cha said.
She said some might be concerned about the potential of risk accumulation as a result of increased booking activities in Hong Kong but the government would be able to solve the problem by introducing appropriate policies.
In a report released on Wednesday, the council called on the Securities and Futures Commission and the Monetary Authority to introduce new capital requirements for international firms wanting to book their trading contracts in Hong Kong.
It noted the SFC had already consulted the market about reducing capital requirements for over-the-counter derivatives, which, if implemented, would encourage more firms to book such trading in their Hong Kong operations.