Supporters of Hong Kong’s higher stamp duty tout benefits even as rising transaction costs make trading one of the most expensive in the world

The increased duty is likely to add HK$12 billion in annual income to the government’s coffers and curb activities of high-frequency traders

The higher tax will make Hong Kong the second-most expensive market in the world to buy and sell shares after Britain

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Published: 10:00am, 27 Mar 2021Updated: 10:41am, 27 Mar 2021

Hong Kong’s plan to increase stamp duty by 30 per cent in August will add much-needed revenue to the government’s coffers while helping to drive away dangerous speculative trading activities by high-frequency traders, according to officials and analysts.

The city is joining global governments in seeking ways to increase revenue to finance a reboot of struggling economies after the Covid-19 pandemic. Hong Kong and the US, where the stock market performances have outpaced the pandemic-wrecked economies, have become testing grounds for the move.

In Hong Kong, even when the city faced the worst economic recession on record last year, the stock market’s average daily turnover rose 49 per cent. Market turnover doubled in the first two months of 2021 while funds raised from new listings surged more than 6.5 times, according to Refinitiv’s data.

“Every sector in Hong Kong had been hit hard by the pandemic, except the financial sector,” said the Liberal Party’s leader Felix Chung Kwok-pan, a representative of the textiles industry in the legislature on behalf of the city’s third-largest political party, and an advocate for increasing the stamp duty.

Hong Kong’s Financial Secretary Paul Chan Mo-po proposed in his budget last month to increase the stamp duty on stock transactions to 0.13 per cent on the value of the trading for both the buyer and seller, from 0.1 per cent, or a total of 0.26 per cent for each transaction starting on August 1. That means an extra HK$600 (US$77.25) in duties flowing into the city’s coffers for every HK$1 million worth of stocks changing hands.