HK Tax Experts Warn Deficit Poses Threat To Investor Confidence

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

04 February 2002

Tax experts in Hong Kong have warned that the government risks damaging the jurisdiction's image with foreign investors if it does not take serious action to address the worsening economic crisis, according to a report in the South China Morning Post.

Experts met with Financial Secretary Antony Leung Kam-chung as part of his pre-budget consultations. Senior Tax Partner at PricewaterhouseCoopers, Tim Liu Tim-leung was among them, and described the meeting to the SCMP:

'These senior economists and analysts from major broking houses put the view that, if Hong Kong is not seen to be able to deal with the situation, investor confidence could start eroding [among] people [already] investing in Hong Kong and potential investors,' he revealed.

Mr Liu, who is also a member of the Hong Kong Government Advisory Committee on broad-based taxes, suggested that the introduction of a sales tax - controversial though it would inevitably be - could be one possible solution. He explained that while a 1% increase in salaries tax would raise only HK$2.5 billion, and a 1% increase in profits tax just HK$2.6 billion extra, a 3% sales tax increase would bring the government at least an additional HK$18 billion every year.

However, a sales tax would take several years to implement, and at present there are very few significant voices being raised in support of the idea, especially in view of the economic downturn.

Recommended