Hong Kong’s problem with stamp duty and the super-rich
Authorities have long tolerated a “loophole” used to avoid paying stamp duty
If Chen Hongtian had paid the roughly HK$170 million in stamp duty for buying Asia’s most expensive property at the Peak, that would be news.
As it is, the mainland tycoon is paying the HK$2.1 billion for the company that owns his new home on Gough Hill Road. In which case, he is just buying the company’s shares and so will not be hit by the mega stamp duty but only a tiny share transfer fee.
The manoeuvre is variously described as tax avoidance and a loophole. But the most accurate description is probably one used by a veteran property agent quoted in the Post story: standard practice.
It’s difficult to call something a loophole when it looks like it’s put there intentionally and tolerated for years by the authorities.
Hong Kong people have been speculating on property by buying and selling their ownership through companies for as long as I can remember, and not just in the high-end market, even though it’s far more common there.
During the most recent property bubble, the government rolled out anti-speculation measures over several years.
The special stamp duty, introduced in late 2010, aims to deter short-term resales and stands at 10 to 20 per cent of the sale price, depending on how fast the property changes hands.
When Leung Chun-ying came to power, he imposed the so-called spicy measures such as the buyer’s stamp duty, which requires non-locals and companies owned by locals or foreigners to pay an extra 15 per cent. Buyers who acquire more than one flat are required to pay double stamp duties.
Every time a new measure was rolled out, critics and lawmakers pointed out the “loophole” about company share transfers for the purpose of property transactions. Each time, officials ignored it. So it’s simply not true that they didn’t know about it. It’s being kept in place deliberately.
With reason, the government doesn’t want to touch the really high-end market where properties are sold for, say, upwards of HK$100 million. Why go after these really important people when their playground market doesn’t really concern or affect ordinary people?
After all, those measures aim to curb speculative activities and prices for ordinary folks, not the super-rich.