Macau Offshore Zone Not A Threat To Hong Kong, Says Minister

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

17 June 2004

Responding to a question tabled in the Legislative Council, Secretary for Economic Development and Labour, Stephen Ip downplayed the impact of Macau’s Offshore Law on the Hong Kong’s trade and tax revenues.

According to a preliminary study conducted by the Hong Kong Government Economist, a total of about 220 offshore organisations, most of which have transferred from Hong Kong, had been set up in Macau by the end of 2003, attracted by the Offshore Law introduced shortly before the return of sovereignty to the Mainland in late 1999 by the then Macau government.

However, whilst acknowledging the study’s conclusion that the relocation of Hong Kong firms offshore would have an impact on the city’s tax revenue, trade in goods, export of services and employment, Mr Ip pointed out that the overall impact on the city at the moment is “insignificant”.

The Minister also dismissed suggestions that Hong Kong should offer tax incentives in a bid to compete with Macau, arguing that the city’s taxes are already amongst the lowest in the world, and that therefore such a policy would only serve to complicate and distort the tax system.

“They will result in discriminatory treatment among different industries and different classes of taxpayers operating in Hong Kong, thus diminishing many of the attractive features of our tax system,” he noted.

“Our tax regime is simple and predictable, and applies fairly to both local and foreign individual and enterprises. We provide a level playing field for investors, irrespective of their size and origin,” explained Mr Ip in his written response to a question tabled by a question by the Hon. Hui Cheung-ching.

Nevertheless, Ip stated that the government will continue to monitor developments in Macau.

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