Hong Kong eyes mainland tax exemption for small group of professionals, boost for biotech industry

A small group of Hong Kong professionals, such as university professors, who work on the mainland for more than 183 days per year may be exempt from paying higher mainland Chinese salaries tax under new arrangements, according to the city’s financial secretary, Paul Chan Mo-po.

Efforts to secure a broader exemption would be “very difficult” to achieve in the near term, Chan said in an interview on the sidelines of the four-day Big Data Expo in Guiyang, capital of the southwestern province of Guizhou, over the weekend.

The proposed tax exemption marks the latest development in discussions between Hong Kong and mainland officials since November last year to push forward the free flow of tech talent across the border. Chan said discussions with mainland authorities are still under way.

A check with the office of the financial secretary on Monday confirmed that the mainland was unlikely to make a broad exemption any time soon, but a small group might be able to.

On the mainland, Chan said the rapid transformation of Guizhou, once China’s poorest province, into the country’s hub for big data and cloud services, is proving a valuable lesson for Hong Kong’s own technology ambitions.

“China is a populous country, while Hong Kong has only 7 million [people],” Chan said. “It will be a tremendous boost to biotech if the mainland and the city can work together.”

He said opportunities for clinical data connectivity were high on Hong Kong’s agenda.

With the backing of massive data, pharmaceutical companies would be better positioned to find cures to diseases, Chan said, adding that the goal was to explore “well-rounded” data cooperation on both sides.

The annual exhibition and forum is where attendees from Chinese government officials to executives of foreign tech companies like Facebook, Apple and Qualcomm and the country’s own tech giants gather to discuss trends in big data. It has been four years since Guizhou province was hand-picked to spearhead the development of big data in China. During a visit to the area in 2015 Chinese president Xi Jinping said: “A nation will only prosper when its technologies thrive.”

The financial secretary said he still recalls the first time he visited the mountainous province in the 1990s. “People were poor at that time, eating plain noodles with animal guts.”

Referring to the recent big data projects in the province he said: “In less than three years of hard work, it has already made a remarkable achievement. I’m here to look and learn.”

This year is the first time Hong Kong authorities have sent an official delegation to the expo, which is co-organised by the National Development and Reform Commission and the Guizhou provincial government.

Guizhou, the province with the lowest per capita GDP before 2015, has since attracted tech firms including IBM, Microsoft, Qualcomm, Apple and local company Huawei Technologies to set up data centres and cloud computing bases. Last year, its economy grew 10.2 per cent, putting it among the top three fastest growing regions in China.

Financial services is another field in which Hong Kong can excel and team up with mainland China for mutual benefit, according to Chan. “Many big data firms I have met in Guiyang expressed their interest in going public in Hong Kong, especially with the option now available to list with dual stock structures.” Such structures, previously banned in Hong Kong, give company founders more rights than other shareholders and have proven popular with tech start-ups.

“I am confident of financial services as our core strength,” said the financial secretary, adding that Hong Kong could also serve as “a platform for biotech and artificial intelligence”, connecting researchers in labs in China and overseas.

The city is targeting four pillars – AI, fintech, smart city and biotech – to develop its tech and innovation strength, said Allen Yeung, the Hong Kong government’s chief information officer. He said Hong Kong offers robust intellectual property protection and the city’s growing eco-system provided a testing ground for mainland Chinese tech giants to go global. “We want to be the interface for the mainland,” Yeung said.

The value added of the medical services and innovation/tech industries accounted for 1.7 per cent and 0.7 per cent respectively of the city’s GDP in 2016, according to a government statistics report released in May.

“The government is trying to bring in more companies to assume a critical mass for the tech industry, although in order to achieve that we still need time,” Chan said.