Hong Kong Lawmakers Approve Tax Raising Measures

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

18 June 2004

Hong Kong’s Legislative Council on Wednesday approved a bill designed to help shore up the territory’s public finances by closing various tax loopholes and strengthening anti-avoidance provisions.

The Inland Revenue (Amendment) Bill 2000, which was approved in a 31-8 vote (with nine lawmakers abstaining), will tighten procedures concerning the deduction of interest expenses, the depreciation of commercial and industrial buildings and the payment of royalty income.

It also revises rules relating to the determination of certain costs and fees for tax appeal cases handled by the Board of Review.

"The main purpose of the Bill is to effectively combat tax avoidance activities,” Secretary for Financial Services and the Treasury, Mr Frederick Ma, told legislators.

"The Bill, if adopted, can recover tax revenue or prevent tax revenue loss amounting to tens of billions of dollars, according to the Inland Revenue Department's estimate," he argued in defence of the legislation.

According to reports in the regional media, a Treasury spokesperson has stated that the interest expense changes will help prevent annual revenue losses of HK$1 billion per year, whilst the royalty provisions will help the government to claw back some HK$200 in annual revenues.

The government also said that the changes are being carried out after full consultation with professional and trade associations.

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