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Hong Kong's Chief Executive, CY Leung, has explained how the territory aims to boost growth opportunities, including through the use of tax breaks.
Leung outlined plans to strengthen collaboration with Mainland China in his 2017 Policy Address delivered on January 18. With "China playing an increasingly prominent and leading role in the global economy," he said, "Hong Kong's dual advantages of 'one country' and 'two systems' and its role as the 'super-connector' are becoming more apparent. Leveraging the National 13th Five-Year Plan and the Belt and Road Initiative, Hong Kong enjoys endless opportunities" in new markets.
He said Hong Kong intends to further expand and enhance the Closer Economic Partnership Arrangement (CEPA) trade treaty with the Mainland. The liberalization of trade in services was achieved last year, and it is planned that, this year, the CEPA will be extended into the areas of investment, and economic and technical co-operation.
In addition, he said developments in China's free trade zones, particularly in Qianhai and Hengqin in Guangdong province (the closest to Hong Kong), are of particular interest and may open up opportunities for collaboration.
He also singled out the work being done by the Financial Services Development Council (FSDC), which has, over the past four years, released 26 reports that have put forward an array of recommendations on the sustainable development of Hong Kong's financial market and financial services sector. He confirmed that "the Government will actively consider the recommendations on taxation, laws and regulations, nurturing talent, etc., and implement the feasible measures."
FSDC's most recent report looked at the tax changes that the Government could introduce so as to promote Hong Kong as a preferred location for international financial product origination and trading centers. It suggested amending the city's interest deductibility rules so that interest expense paid by a company licensed by Hong Kong's Securities and Futures Commission should also qualify for a tax deduction in the same way as a bank.
Leung noted that such enterprises "create new impetus for economic and social development, Hong Kong's application of innovation and technology notably trails the Mainland in various aspects. Facing competitors, Hong Kong must consider how to enhance its overall competitiveness, including offering tax and financial concessions, to attract enterprises from Hong Kong, the Mainland, and overseas."
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