Tang Proposes CGT Introduction

by Mary Swire, for LawAndTax-News.com, Hong Kong

17 November 2004

A proposal put forward earlier this month by Hong Kong's Finance Secretary Henry Tang to introduce a capital gains tax in the territory has been badly received by the majority of economic observers and tax experts.

The Hong Kong government is currently considering ways in which to broaden its tax base and reduce the size of its deficit. However, speaking to the LMG news service recently, Baker & McKenzie Hong Kong tax chief, Michael Olesnicky strongly condemned the proposal, observing that:

"A capital gains tax would be complete anathema to everything Hong Kong stands for." He went on to add: "The vast majority of people in Hong Kong do not pay any tax at all so any new taxes get a lot of opposition."

Mr Olesnicky concluded by suggesting to the news service that the goods and services tax (GST) also currently under consideration would provide a much more effective and popular alternative.

This is a viewpoint supported by the International Monetary Fund, which in its recently published annual review of the SAR's economy urged the government to consider the introduction of a sales tax in order to safeguard the economy against the unpredictability of government's current main revenue streams, namely land sales and investment gains.

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