Hong Kong's Tax Cuts Good For Business

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

17 December 2010

In reply to a question in the Legislative Council, Hong Kong’s Secretary for Financial Services and the Treasury, Professor K C Chan, confirmed that the abolition of estate duty in 2006 and of wine duty in 2008 have benefited the asset management and wine-related businesses, respectively.

Firstly, Chan pointed out that while it is difficult to give an accurate assessment of the additional investment induced solely by the abolition of estate duty, the finance industry generally agrees it has generated a positive impact on the asset-management business and the financial sector as a whole.

“Our asset-management business and investment environment have become even more attractive and competitive following the abolition of the tax. With the abolition of estate duty and the support of government policies, coupled with the continued promising economic outlook and improving business environment, Hong Kong has become increasingly attractive to local, Mainland and overseas investors,” he said.

He noted that the year the estate duty was abolished Hong Kong's combined fund-management business grew by 36% from HKD4.5 trillion (USD580bn) in 2005 to HKD6.15 trillion in 2006. In subsequent years, there was a continuous expansion in asset-management business, both in size and growth rate, save for 2008 due to the impact of the global financial crisis. The number of fund management employees also rose from 16,100 in 2005 to 27,700 in 2009.

Secondly, he added that the abolition of the wine tax saw total wine imports to Hong Kong increase from HKD3.2bn in 2008-09 to HKD4.6bn in 2009-10, and that the growth in wine business has bolstered wine trading, distribution, auctions and related activities, like catering services, tourism and educational events.

The Commerce & Economic Development Bureau said the addition of 850 wine-related companies in 2008 and 2009 brought Hong Kong's total of wine firms to 3,550. Companies received HKD5.5bn in wine-related business receipts in 2009, up more than 30% on 2007. In 2008 and 2009 the number of people engaged in wine-related businesses rose by more than 5,000, bringing the total to nearly 40,000 by the end of last year.

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