HK Multinationals Warn Over Exclusion From CEPA Deals

by Mary Swire, Tax-News.com, Hong Kong

15 March 2002

Multinational companies based in Hong Kong have warned the Government not to exclude them in any agreements it comes to with mainland China.

Under the Closer Economic Partnership Arrangement (CEPA), the SAR authorities are seeking special access to mainland services and markets, and tax breaks for Hong Kong exports and companies. However, there remains some confusion as to the model of a Hong Kong company which is being used during inter-governmental negotiations, and this is causing the jurisdiction's international business sector some concern.

In a draft document obtained by the South China Morning Post prior to today's deadline for submissions from business groups, the American Chamber of Commerce (Amcham) said that it would oppose any CEPA agreements which exclude international companies 'legitimately established in the SAR'. The trade organisation's chairman, Jim Thompson, was quoted as expressing concerns at the possibility of 'level playing field tilting' against multinationals established in the region.

In its submission to the Government earlier this week, in addition to proposing that exports from the SAR to the mainland should be tariff free, the Hong Kong General Chamber of Commerce offered several suggestions as to how a 'Hong Kong company' could be defined, including: ownership and control by SAR permanent residents, 25% of revenue received from Hong Kong or China, or a five year residential presence in the jurisdiction.

However, the American Chamber of Commerce urged the authorities to consider industry specific definitions in order to avoid excluding international companies.

'We would, therefore, encourage negotiators to consider the option of accepting a broad definition of a Hong Kong company for the overall document, but to develop more specific definitions on an industry-by-industry basis,' the document obtained by the SCMP explained.

Representatives from the British and Canadian Chambers of Commerce expressed their support for the CEPA project, but warned that they would also be keeping a close watch on the process in order to ensure that multinational companies benefit equally from any arrangement.

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