Advances 13 recommendations to support economic growth and improve overall well-being 

(HONG KONG, 10 February 2020) Today, the Hong Kong Institute of Certified Public Accountants (“HKICPA”) has announced its tax policy and budget proposals for 2020-21. Under the theme "Together for a Better Hong Kong", a range of 13 different measures were suggested to retain the city’s long-term competitiveness and help relieve the financial pressures on citizens.

HKICPA estimates that the fiscal deficit for 2019/20 will reach HK$18.1 Billion at the end of March. The deficit has been driven by the downturn in the economy, due to the effects of US-China trade dispute during 2019-20, the impact of the social unrest on specific sectors, such as tourism, retail and catering, and now also concerns over the spread of the novel coronavirus.  

However, fiscal reserves are expected to stand at HK$1.15 Trillion, an adequate level to cover government expenditure on local community support amid the economic downturn. “Hong Kong’s economy is at a crossroad, facing various domestic challenges as well as a slowdown in global growth. The increasing pressure on public finances, coupled with intensifying competition for business from other jurisdictions in the region and globally, and the changing international tax landscape, all point to a need to take a harder look at the city’s long-term positioning and competitiveness. In order to maintain Hong Kong’s strength as a global financial hub, the government needs to conduct comprehensive review of business and tax policies to help secure Hong Kong’s future economic success,” said Mr. Johnson Kong, President of HKICPA.

“Apart from a holistic review of the tax system, our proposals strongly emphasize improving the business environment for startups and new economy enterprises and, at the same time, providing additional support for the middle class and those most in need. Our suggestions include measures aimed at creating a better living environment for citizens by raising the standard of Hong Kong’s air quality and helping to ease the difficulties faced by citizens due to the unaffordable property prices and high cost of living. We call on the government to take further steps to provide immediate relief and to build a better Hong Kong for the long-term, through tax and non-tax measures,” explained Mr. Kong. 

Benefiting the middle-class and the underprivileged

The middle class constitutes a key engine of the economy. The Institute advocates enhancing assistance for them, as well as reaching out to low-income people not receiving any government assistance. “While they may not benefit greatly from the recent raising of the ceiling for the 2018/19 tax rebate to 100% from 75%, because the cap remains at $20,000, providing an increased cap of HK$30,000 under salaries tax, and for individuals taxed under personal assessment, as well as for profits tax, would help the middle class in the coming year. The government should also consider giving out a cash subsidy to permanent residents aged 18 and above, who are not taxpayers and do not own any property, so as to benefit the so-called ‘N-nothings’,” said Mr Curtis Ng, Convenor of the Budget Proposals Sub-committee, at HKICPA. “We suggest that some of this should be in the form of retail coupons, which would ease pressure on sectors that have come under considerable strain in recent months due to the social unrest and, more recently, by the outbreak of the coronavirus.” 

Given the continuing high property prices, the Institute believes the government should give further consideration to the idea of introducing of a home rental tax deduction, with a ceiling of HK$100,000 per year, for Hong Kong residents who do not own their own home and need to rent from the private sector (and who do not already receive a larger rent allowance from their employers). 

Supporting employees and local businesses 

In view of the downward trend in economic activity, it is anticipated that a substantial number of companies in the retail and catering industries, among other, may be forced to close down in the coming months. 

“As it is foreseeable that the number of individuals seeking help from the Protection of Wages on Insolvency Fund (“PWIF”) may increase significantly in the future; but some of the current ceiling levels for claims under the PWIF are relatively low. Therefore, we suggest that the government review the claim ceilings to meet employees’ basic needs in the case of redundancy,” said Mr. Kong. 

“For business owners, on the other hand, the government should consider introducing a mechanism for tax loss carryback into our tax system, as means to help relieve the cash flow pressure that businesses face during economic downturns,” said Mr. So Kwok Kay, the Past Chairman of HKICPA’s Taxation Faculty Executive Committee (TFEC). In many developed countries, tax loss carryback is available and taxpayers who are making a current-year tax loss may be able to get refund of tax paid in the prior year or years. It helps businesses ease their cash flow problems if they suffer a sudden deterioration in their performance. The Institute also asks the government to consider providing group tax loss relief to companies investing in startups, so that tax losses from those operations could be absorbed by other profitable group companies. This is another measure that could help ease businesses’ cash flow problems, instead of a tax refund.

Research and development (“R&D”) plays a pivotal role in spurring economic growth in many jurisdictions. To support Hong Kong’s long-term success in innovation and developing new businesses, the Institute advocates improving access to funding and support for R&D, to generate more patents and other homegrown intellectual property. “Many startups incur substantial tax losses in their early years of operation and cannot enjoy the benefits of the R&D super deductions introduced in 2019. The government should consider providing cash grants and equity financing to startups that meet certain qualifying conditions. Tax credits, grants and other kinds of support for startups are common around the world,” added Mr. So. 

Currently, startups and SMEs could be confused about their eligibility for financial assistance, given the 60-plus government-supported funding programmes potentially available. “To improve efficiency and effectiveness, the government should look at rationalising and consolidating these efforts. They should set up a centralised team or ‘one-stop shop’ to assess applications and advise applicants on the most appropriate route for them to apply for preferential programmes,” said Mr. So.

Investing in the tax regime development

HKICPA has been highlighting the importance of conducting a holistic review of the Hong Kong tax system for the past several years. “The holistic review has become even more pressing in the light of recent international tax initiatives affecting Hong Kong, among others. In the budget proposals this year, we reiterate the need to undertake a review, given the changes in the international tax landscape, as well as the gradual erosion of Hong Kong’s competitive edge,” said Mr. So. The Institute also stresses the importance of the Tax Policy Unit having a sufficiently broad and diverse membership to support an objective and wide-ranging review of the system. 

In order to bolster Hong Kong’s competitiveness and revitalise the economy, the Institute urges the government to consider providing a legal and regulatory environment that is more supportive of the emergence of new economy enterprises.  

“Certainly, the emergence of the digital economy brings challenges to traditional tax systems, particularly in relation to taxing rights, and a number of countries are struggling with this. It also poses questions for the law and regulation in Hong Kong,” said Mr. So. “Many people doubt whether Hong Kong’s laws and regulatory regime adequately support or encourage the development of the shared economy and other emerging developments. The government should examine how the environment could be made more conducive for new economy businesses to develop in Hong Kong.” 

Expanding environment measures 

Tackling climate change is undoubtedly one of the most serious challenges currently faced by many cities around the world, and Hong Kong is no exception.

Many countries have introduced green taxes, which have become an additional effective tool of environmental policy, alongside public education programmes and providing technical and financial assistance to foster industries engaged in environmental protection.

“The Institute believes the government should explore the possibility of introducing more measures, be they tax or non-tax, in Hong Kong, taking the ‘polluter pays’ principle into account. Examples could be introducing emissions taxes, as tax measures, and cash subsidies to companies who choose to use energy-saving and lower-emission products, as non-tax measures,” said Mr. William Chan, TFEC Deputy Chair.

“One area that needs to be addressed is vehicular pollution. More needs to be done to cut pollution due to an aged vehicle fleet in Hong Kong”, added Mr. Chan. The current taxi replacement rate is 1,000 units per year, meaning it will take more than seven years to replace taxis that are over 10 years old. Looking at the replacement rate of different vehicles, HKICPA proposes incentives such as subsidies for replacing old vehicles, covering aged diesel vehicles, taxis and minibuses. Drivers should be incentivised to switch to electric and hybrid private cars. Where they are replacing old petrol or diesel vehicles, the first registration tax on such vehicles should be reduced to the level required to install a new charging station (which we understand to be around HK$50,000). The government could then use the income from the first registration tax to install more charging stations within public car parking spaces.

The HKICPA Hong Kong tax policy and budget proposals 2020-21 "Together for a Better Hong Kong" are available at https://www.hkicpa.org.hk/-/media/Document/APD/Gov-Budget/Budget_Proposals_2020-21_submission_200210.pdf

 

香港會計師公會建議檢討稅制支援民生與中小企 應對經濟不景
13項建議支持經濟增長改善整體民生

（香港，二零二零年二月十日）香港會計師公會今天發表二零二零至二一年的稅務政策及財政預算案建議，以「齊心建未來」為題，提出13項措施建議，助本港鞏固長遠競爭力，紓緩市民的經濟壓力。 

公會估計，二零一九至二零二零年度財政赤字於三月底達181億港元。赤字是由於二零一九至二零二零年度中美貿易爭議持續；社會氣氛緊張令旅遊、零售及餐飲等行業受影響；加上對新型冠狀病毒蔓延的憂慮，導致本港經濟低迷。

然而，公會預期財政儲備將約為1.15萬億港元，足夠政府在經濟逆境下的民生支出。香港會計師公會會長江智蛟表示：「香港經濟正面臨重重難關，既要應對本港各樣挑戰，亦要面對全球經濟增長放緩。公共財政壓力日增，區內及全球各地的市場競爭激烈，以至國際稅務環境變化，均顯示香港要檢視其長遠競爭力及發展定位。為維持香港作為全球金融樞杻的優勢，政府應對商業及稅務政策進行全面檢討，促進本港未來經濟繁榮。」

江先生解釋說：「公會建議政府對本港稅制作全面檢討之餘，更要為初創及新興經濟企業提供有利的營商環境，並為中產階層及有需要人士提供額外支援。公會提出多項建議措施，包括透過改善本港空氣質素，以及協助減輕市民面對樓價及生活成本高企的負擔，以創造更宜居的環境。我們促請政府推行即時援助方案，並實行稅務及其他措施，長遠為香港建設更美好未來。」

惠及中產及弱勢社群

中產階層是推動經濟發展的重要一群。公會建議政府加強對他們及未合資格獲得任何政府資助的低收入人士的支援。公會財政預算案建議委員會召集人伍耀輝先生說：「儘管政府最近將二零一八至一九年度稅款寬減上限由75%提升至100%，但由於上限仍為2萬港元，這群人士未必能受惠很大。若將薪俸稅、以個人入息課稅方式評稅的人士以及利得稅的寬減上限提升至3萬港元，來年將能幫助到中產人士。政府亦應考慮向18歲及以上非納稅且沒有任何物業的人士給予現金補貼，令俗稱的「N無人士」受惠。公會建議當中部分可以購物券形式發放，從而幫助因近月社會氣氛緊張及最近冠狀病毒爆發而經營困難的行業。」

有見樓價高昂，公會認為政府應深入考慮提供房租扣稅額，每年上限為10萬港元，給予沒有自置物業而在私人市場租屋（及僱主給予的租金津貼不足10萬港元）的本港居民。

照顧僱員及本地企業

鑑於經濟有下滑趨勢，預料未來數月各行業（例如零售及餐飲）不少公司要迫於結業。

江先生表示：「未來向破產欠薪保障基金（「基金」）求助的人士數目可能會大增，然而當前基金若干特惠款項的上限仍較低。因此，我們建議政府檢視相關款項的上限，讓僱員一旦被裁減能應付基本所需。」

公會稅務師會執行委員會前主席蘇國基先生說：「就企業東主方面，政府應考慮引入稅務虧損轉回機制（即將虧損抵扣過往稅款），以幫助紓緩企業於經濟衰退時所面臨的現金流壓力。」不少先進國家都設有稅務虧損轉回，納稅人若於本年度錄得稅務虧損，可領回於上年度或過往年度所繳的稅款。此舉可助企業業績驟跌時緩解現金流的問題。公會亦建議政府考慮為投資初創企業的公司提供集團稅務虧損抵免，讓初創業務的稅務虧損由集團內其他有盈利的業務分擔。這亦是退稅以外可助企業減輕現金流壓力的方法。

研發活動對推動不少地區的經濟增長發揮關鍵作用。為支持香港創新及新興產業的長遠發展，公會建議改善對研發活動的資助及支持，激勵市場發展更多專利及其他本港知識產權。蘇先生說：「許多初創公司在運營初年會錄得大額稅務虧損，無法即時受惠於二零一九年為研發引入的額外稅務扣減。政府應考慮為符合若干條件的初創公司提供現金補助和股本融資。為初創企業提供稅務抵免、補助及其他形式的支援在世界各地都很普遍。」

目前，政府為初創公司及中小型企業提供的資助計劃共有60多項，企業在搜尋合資格資助時或會感到困惑。蘇先生說：「為提高效率及成效，政府應整合優化這些計劃，成立中央統籌團隊或以一站式服務來評估申請，並為申請人建議最適當的優惠計劃申請方式。」

投資於稅制發展

於過去數年，公會一直強調對香港稅制進行全面檢討的重要性。蘇先生說：「多種因素包括最近的國際稅務發展將會影響到香港，令需要變得更加迫切。鑑於國際稅務環境變化，加上香港競爭優勢逐漸削弱，公會在今年的預算案建議中再次提出要全面檢討稅制。」公會亦強調稅務政策組具備廣泛多元的成員十分重要，以利進行客觀全面的稅制檢討。

為增強本港競爭力、振興經濟，公會促請政府提供更完善的法規環境，助新興經濟企業萌芽。 

蘇先生說：「無可否認數碼經濟為傳統稅制帶來挑戰，尤其是徵稅權方面，許多國家都在努力應對。這亦令人對香港的法律法規產生疑問，究竟本港法例是否充分配合或鼓勵共享經濟及其他新興產業的發展。政府應探討如何營造更有利環境，讓新經濟企業在香港百花齊放。」

擴大環境措施

應對氣候變化無疑是世界各地當前最嚴峻的挑戰之一，香港亦不能獨善其身。

不少國家已實行環保相關的稅項，以這種環境政策措施，配合公共教育計劃，以及技術財務資助計劃，有效推動各行各業保護環境。

公會稅務師會執行委員會副主席陳錦榮先生說：「公會認為政府應以『污染者自付』原則，探討在本港實施更多稅務及非稅務措施的可能性。稅務措施方面，例如引入排放稅，而非稅務方面可向選擇採用節能及低排放產品的公司提供現金補貼等。」

陳先生補充說：「車輛污染是其中一個需要應對的範疇。香港有車輛老化問題，要加倍努力以減少污染。」目前的士的更換率每年約為1,000輛，意味着更換車齡十年以上的的士需時七年以上。針對不同車輛的更換率，公會提議推出鼓勵措施，例如包括舊柴油車、的士及小巴在內的更換舊車補貼，以及鼓勵車主轉用電動及混合動力私家車，當市民更換舊汽油或柴油車輛時，應將此類車輛的首次登記稅降低至安裝新充電站所需的水平（據公會了解費用約為5萬港元）。政府之後可以首次登記稅的稅收於公共停車場安裝更多充電站。

公會的二零二零至二一年度稅務政策及財政預算案建議全文已上載 https://www.hkicpa.org.hk/-/media/Document/APD/Gov-Budget/Budget_Proposals_2020-21_submission_200210.pdf，以供參閱。