Hong Kong Profits Tax Could Increase Warns Business Leader

Mary Swire, Tax-News.com, Hong Kong

30 January 2001

According to a report in the Hong Kong iMail newspaper, Hong Kong could see a possible increase in the rate of profits tax. Chinese General Chamber of Commerce vice-chairman and Liberal Party legislator, Ho Sai-chu, said he did not want to see any tax increases but that Financial Secretary Donald Tsang Yam-kuen could realistically raise profits tax from 16.5% to around 18 per cent - although only if he was determined to cut the budget deficit.

Mr Ho said if the government planned to reduce the budget deficit, it should impose an initial increase of 0.5 per cent in profits tax and later cap it at 18 per cent. Speaking at a local forum, he said that raising profits tax would be less damaging than the introduction of a sales tax, which would hinder Hong Kong's economic recovery and hit businesses hard.

Mr Ho warned that Hong Kong should not move towards raising taxes. Renowned for its low tax regime, Hong Kong could lose potential investment from overseas if it started to shift towards higher taxation.

Marcellus Wong Yui-keung, of the Taxation Institute of Hong Kong, was reported as saying that both profits tax or sales tax measures would only be a temporary solution to the deficit problem and both would deter investment. He suggested that the government should look at its expenditure and the tax systems as a whole. He added that if a sales tax was introduced, exemptions or subsidies should be given to low-income groups to avoid widening the wealth gap.

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