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Hong Kong Airport Rethinking Tax For Expansion

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

23 April 2015


With a view to lowering the level of the proposed Airport Construction Fee (ACF), the Airport Authority Hong Kong (AAHK) is revising its proposal for funding the HKD141.5bn (USD18.25bn) cost of constructing a third runway at Hong Kong International Airport (HKIA).

Last month, it was reported that, based on the "joint contribution and user-pay" principle, the AAHK would seek to fund the project through three channels: about HKD53bn (38 percent) from bank loans and bonds; HKD47bn (33 percent) from the cessation of payment to the Government for ten years of dividends in relation to the airport's operational surplus; and around HKD42bn (29 percent) from the fees and charges to be imposed on airport users, including introducing an ACF of HKD180 (USD23.2) per departing passenger.

Although it is generally recognized that a third HKIA runway is necessary, the proposed high rate of ACF raised some concerns. A member of the Legislative Council pointed out recently that, as AAHK currently has a AAA credit rating from Standard & Poor's, it should consider instead seeking more credit, enabling either a lower rate of ACF or the avoidance of its introduction.

Secretary for Transport and Housing Professor Anthony Cheung Bing-leung confirmed that AAHK is reviewing its proposed financial arrangement with a view to maximizing borrowings from the market and mitigating the impact of the ACF on passengers He also confirmed that the Government has no plan to cut or suspend the imposition of Air Passenger Departure Tax (APDT).

TAGS: Construction | tax | business | air passenger duty (APD) | aviation | fees | travel and tourism | tax rates | Hong Kong | dividends | construction | Tax

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