Hong Kong Government's Budget Too Cautious for Business, say Accountants

The government’s budget announced last month is too cautious given the economic recovery, the fiscal measures are mainly short-term and one-off, and the budget does not sufficiently address long-term tax competitiveness, says the Hong Kong Institute of Certified Public Accountants.

 

On the other hand, the group of accountants supports Financial Secretary John Tsang’s proposals to build the asset management business by extending stamp duty and profits tax concessions. The institute also welcomed his proposal to extend tax deductions to trademarks, copyrights and registered designs. The accountants, however, also recommended “super deductions” for research and development expenditures to speed up innovation in Hong Kong companies.

 

The institute is particularly disappointed with the budget’s lack of attention to the long-term competitiveness of Hong Kong’s tax system. “We compete with other jurisdictions for business, but we don’t clarify significant uncertainties in our tax system,” according to Ayesha Macpherson, chair of the institute’s tax committee.

 

Craving Certainty

 

The institute has asked the government to give businesses the certainty it craves in matters of taxation by clarifying treatments concerning the source of profits – the location where profits are made and whether they are taxable in Hong Kong – and source of employment income. The institute wants the definition for source of employment income to refer to the place where services are rendered.

 

The institute has also recommended the government to shorten the time limit for finalisation of tax affairs from six to three years and to deem tax returns as final if the tax authorities do not raise an inquiry within 12 months.

 

The institute also recommends the adoption of group loss relief and loss carry-back.

 

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