Hong Kong Should Abolish Estate Tax, Says E&Y
by Mary Swire, Tax-News.com, Hong Kong
05 October 2004

Accounting firm Ernst & Young has urged the government of Hong Kong to abolish the territory’s estate tax, arguing that the levy is no longer seen as relevant in Hong Kong’s modern economy.

According to Owen Chan, a partner at E&Y, the government should take a progressive approach towards complete abolition of death duty when fiscal conditions permit, likely to be in 2008/2009.

“There were changes in circumstances since Estate Duty was first introduced in 1915,” noted Mr Chan, adding that the original objective of the tax when brought in was to “enable the whole community to benefit upon the death of persons who had grown very rich partly through the appreciation in value of assets and the progress of Hong Kong to which the whole community contributed".

Chan observed that the nature of Hong Kong’s economy has changed greatly during the past ninety years, particularly in the import/export and financial services sectors, and suggested that these changes affect the fundamental principle of the original objective of the tax.

Total revenues collected from estate duty amount to some HK$1.5 billion per year (US$192.3 million), or about 4% of government capital revenue.

There were about 1,300 cases which attracted the tax during the past two years, with many exempted and about 300 which actually resulted in duty being paid.

The government is expected to comment on responses to a consultation paper on the future of estate tax, issued in July, in the 2005/2006 budget.

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