Tax policies to ensure Hong Kong’s competitiveness and specific measures to uplift the city’s economy and community are recommended

(Hong Kong, 10 January 2017) The Hong Kong Institute of CPAs' budget proposals, under the heading, Joining the Dots… Connecting the tax system with the needs of the economy and the community, call on the government to set up a more holistic tax system that balances the need to maintain a healthy revenue base, while supporting a strong economy and community and being responsive to international developments. The Institute urges the government to implement tax initiatives to sustain Hong Kong's role as a financial and commercial centre, foster an environment that is supportive of entrepreneurs and start-ups, and improve people's livelihoods.

Tax policy and the economy

The Institute renews its call to establish a tax policy unit comprising taxation and industry experts, as well as government representatives to make recommendations on how to enhance the overall competitiveness of Hong Kong's tax regime, modernize the Inland Revenue Ordinance, and address the potential impact of international tax developments. The unit's role should include helping Hong Kong to position and prepare itself in relation to global initiatives for greater transparency in tax matters, such as the OECD's base erosion and profit shifting initiative. This initiative has been endorsed by the G20 group of countries, including China.

Anthony Tam, chair of the Institute's taxation faculty executive committee, says, “While there is no 'one size fits all' approach to formulating more responsive tax policies, our proposal for a tax policy unit with expert and stakeholder input can add to and complement the work of different government departments and other relevant bodies. It will be able to develop more co-ordinated policies to help bolster the city's role as a major player in global finance and commerce over the longer term.”

Given the government's emphasis, echoed by the community at large, on innovation and technology as a driver of the economy in the future, and the importance to Hong Kong of encouraging an entrepreneurial spirit, the Institute proposes to reduce the corporate profits tax rate to 15% to support small and medium enterprises whose gross income is below HK$5 million. It also advocates a special 10% rate for innovation and technology start-ups in the first two years that they generate assessable profits.

In addition, the Institute proposes a range of tax measures to promote Hong Kong's role as an intellectual property hub, including providing “super deductions” of 150% for research and development conducted in Hong Kong; allowing deductions to be claimed where R&D activities are sub-contracted outside Hong Kong, so long as control and risk-taking remain in Hong Kong; expanding the range of tax deductible IP rights; and providing incentives to support R&D in renewable energy and green industries.

The government itself also needs to enhance its own use of technology and streamline administrative procedures in some areas, in keeping with global trends to become paperless and improve efficiency. In this regard, the Institute urges the government to move more rapidly towards the introduction of comprehensive arrangements for electronic filing of tax returns. The facility for e-fling needs to be further extended to all taxpayers and accommodate existing practices, including filing by tax representatives.

As regards Hong Kong's competitive tax position, it is commonly understood that when selecting investment locations, businesses look not only at headline tax rates, but also effective rates, taking account of incentives and allowances.

“Hong Kong is in danger of falling behind the competition, if action is not taken. The headline tax rates in a number of other jurisdictions are now close to Hong Kong's and they may also offer various specific tax incentives. This is another reason why we need to take stock of Hong Kong's overall position and develop policy measures to serve our future needs,” Tam explains.

At the same time, the network of Comprehensive Avoidance of Double Taxation Agreements should be further expanded, including with countries involved in the Belt and Road initiative and especially those which offer greater potential for economic exchanges with Hong Kong.

The Institute emphasizes that Hong Kong must also continue to build on its traditional strengths, including encouraging investment from a broad range of financial service suppliers.

Tax measures and the community

The Institute recommends a number of measures to support the wellbeing of the community.

Curtis Ng, convenor of the Institute's budget proposals sub-committee, says, “Our proposed measures aim to build a stable, progressive and closer community, which we believe is essential for Hong Kong's overall development. Factors that we considered include the high cost of accommodation faced by families, the need for people to hone their skill sets to succeed in today's competitive workplace, the health and wellbeing of the population, and the importance of encouraging individuals to plan better for retirement."

Even with the stringent stamp duty measures introduced by the government, property prices remain largely unaffordable to the average household. Given the difficulty for many people to buy their own home, the Institute proposes an allowance with an annual limit of HK$100,000 for rental payments, which is equivalent to the home loan interest deduction. This will provide an alternative for those who will not be in position to purchase a home in the foreseeable future and are not eligible for subsidized housing.

To encourage the community to pay more attention to its own long-term health and wellbeing, and the younger generation to develop an active and less sedentary lifestyle, the Institute recommends a new deduction for expenditure on approved extra-curricular sports training courses at a maximum amount of HK$12,000 per child per year. While reports suggest that the government may soon propose a revised voluntary health insurance scheme, this is unlikely to be able to cover all those who may wish to obtain insurance and the tax deduction may be fairly limited. For this reason, the Institute continues to recommend a tax deduction for private health insurance premiums, capped at an annual limit of HK$12,000, with a similar cap per dependant, to encourage more efficient usage of Hong Kong's public and private healthcare services.

In addition, to encourage people to save more and earlier for their retirement, each taxpayer should be allowed an annual deduction of up to HK$60,000 for voluntary contributions to their mandatory provident fund accounts.

“To support the upgrading of skill sets and enable more people to improve their opportunities for career development, the Institute recommends extending the deduction for taxpayers' self-education expenses, so that any unused portions, up to the annual limit of HK$80,000, can be used by the taxpayer's spouse or dependent children,” Ng adds.

Training courses in relation to innovation and technology as well as entrepreneurship offered by reputable providers, which might not otherwise meet the criteria, should also be eligible for self-education deduction, as these two areas are of growing importance to the future development of Hong Kong's economy. 

Summary of Budget Proposals 2017-2018

香港會計師公會前瞻性的財政預算案建議

集中強化稅制，保持經濟民生富裕

稅務政策確保香港的競爭力，並建議特定措施提升本地的經濟民生

(香港，二零一七年一月十日) 香港會計師公會在題為《連繫稅制與經濟民生需要》的財政預算案建議中，呼籲政府建立更全面的稅務體制，平衡政府收入基礎以及經濟和民生方面的需要，並應對國際稅務發展。公會促請政府推行稅務措施，維持香港金融和商業中心的地位，營造一個支持企業家和初創企業的環境，以及改善市民的生活。

稅務政策及經濟發展

公會再次呼籲政府成立由稅務和業界專家及政府代表組成的稅務政策小組，以便就如何提升香港稅制的整體競爭力、使《稅務條例》現代化，以及回應國際稅務發展的潛在影響作出建議。政策小組的角色應包括協助本港定位及回應國際社會對提高稅務透明度的各項措施，如經合組織的稅基侵蝕與利潤移轉行動，此行動得到二十國集團（包括中國）的認可。

公會稅務師會執行委員會主席譚振雄先生表示：「雖然在制訂有效稅務政策上沒有各方面都能兼顧的方法，但我們建議成立由專家和相關人士組成的稅務政策小組，能夠完善不同政府部門及相關組織的工作，可制訂更全面的政策，協助本港長遠鞏固其作為國際金融和商業主要參與者的角色。」

政府強調創新科技是未來經濟的推動力，引起社會大眾的討論，而鼓勵企業家精神對香港的發展很重要，因此公會建議支援總收入不超過 500 萬港元的中小企業，下調其利得稅率至 15%；並建議對創新科技界的初創企業，在其獲得可課稅盈利的首兩年，給予特別利得稅率 10%。

其次，公會建議一系列的稅務措施，推廣香港作為知識產權中心的角色，包括向在香港進行的研發開支提供 150% 的超額扣稅；對於研發活動外判到本港以外地區，但有關調控和風險管理活動仍在香港進行，容許申索扣減；擴大知識產權的可扣稅範圍；及向可再生能源和綠色行業的研發提供稅務優惠。

政府本身亦須提升科技的使用，以及在某些範疇精簡行政程序，以緊貼無紙化和講求高效率的國際趨勢。在這方面，公會促請政府盡快全面引入電子報稅的安排。電子報稅須進一步擴大至所有納稅人及採納現有的做法，包括如由稅務代表申報。

就香港的稅務競爭優勢，企業一般在選擇投資地點時，不單關注表面的稅率，亦會關注包括稅務優惠和扣減在內的實際稅率。

譚先生解釋說：「在這方面，其他國家地區的稅率現已很接近香港，而且他們亦提供多項特定的稅務優惠，因此如果香港不採取行動的話，便會落後於人。這就是香港為何須檢視整體情況，為未來需要制訂政策措施的另一原因。」

同時，政府應該進一步擴大「避免雙重徵稅協定」的網絡，包括「一帶一路」相關的國家以及與香港有較大經濟交流潛力的國家地區。

公會強調香港必須繼續發揮其傳統的優勢，包括鼓勵多種不同的金融服務提供者到港投資。

稅務措施及民生方面

公會就民生福祉方面，建議多項措施。

公會財政預算案建議委員會召集人伍耀輝先生表示：「我們建議的措施，旨在建立一個穩定、進步和更緊密的社區，我們相信這對香港的整體發展是必要的。我們考慮的因素包括家庭面對高昂的住屋成本；市民有需要提升他們的技能，以便在今日競爭激烈的工作環境中取得成就；市民的健康和福祉；以及鼓勵市民為退休作好計劃。」

即使政府已引入印花稅的「辣招」，物業價格仍然高企，非一般家庭可以負擔。由於很多市民購買住房都面對困難，公會建議租金支出可作稅務減免，以每年 100,000港元為上限，這等同於房貸利息的稅務減免。對於未能在可見將來自置物業而又不符合入住資助房屋的人士來說，這提供另類的選擇。

為鼓勵市民關注長遠健康及年輕一代建立積極多運動的生活方式，公會建議一項新措施，就每個兒童的認可課外體育培訓課程的支出作稅務減免，以每年 12,000 港元為上限。雖然報告指政府快將提出經修訂的自願醫療保險計劃，但計劃不太可能涵蓋所有希望獲得保險的人士，而且有關的稅務扣減也是有限的。因此，公會繼續建議容許納稅人的私人醫療保險供款作稅務扣減，上限為 12,000 港元，以及給予他們每名受養人相類似的扣減上限。此舉目的是要鼓勵有效使用公私營的醫療服務。

此外，為鼓勵市民早為退休作儲蓄準備，應容許納稅人為額外的自願性強積金供款作稅務扣減，以每年 60,000 港元為上限。

伍先生補充說：「為支持市民提升技能，改善他們職業晉升機會，公會建議擴大個人進修開支扣除的應用範圍，容許納稅人配偶或子女使用納稅人未使用的份額，以每年 80,000 港元為上限。」

由聲譽良好的教育機構提供的創新科技及企業家培訓課程，雖然未必符合現有條件，亦應有資格獲得個人進修開支扣除，因為這兩個範疇對香港經濟的未來發展越來越

重要。 

主要建議措施