Govt must be proactive on tax reform: Deloitte
Experts from international accounting giant Deloitte have called on the government to take a proactive approach to keeping the SAR's tax regime up to international standards, saying it's crucial in attracting global businesses to operate in Hong Kong Doris Chik, a tax partner at Deloitte China, pointed to changes to how the SAR treats passive income from overseas, which came only after the European Union put Hong Kong on a "grey list" of territories failing to meet its standards. She said the administration should be on the front foot to meet new international standards, such as a global minimum tax for businesses. "We want to encourage certain industries, so we should review it [the tax system] to see whether we can reach that target, make sure that all the tax policies we introduce [are] coordinating with each other, up to international tax standard and effective," she added. She also suggested that the government offer more certainty to overseas investors by issuing a ruling in advance on how much tax they can expect to pay in Hong Kong. And she said the administration should carry out regular, transparent reviews of its tax regime. "Most importantly, they need to release the information to the public and let people know whether they are effective. And also involve experts in analysing this data [to] help them think of any way to improve and amend the regime and make sure that they are more effective," Chik said. "If it[the tax system] is attractive, then more people will come to Hong Kong to set up their business," she added. Deloitte also said the government should study the impact of the global minimum tax on Hong Kong's tax system. The minimum rate of 15 percent rate was agreed as part of a package of measures by 137 countries in October 2021, but Hong Kong has indicated that it won't fully implement the changes before 2024. Deloitte also suggested that Financial Secretary Paul Chan issue fresh HK$5,000 spending vouchers in his February 22 budget. Another tax partner of Deloitte China, Polly Wan, said she noticed some people spent previous rounds of vouchers on necessities – which may not be in line with government's intention of stimulating the retail and services sectors. "[But] there are still many people who would spend more because they have the consumption vouchers on hand," Wan said. The firm's budget team also urged the administration to consider various tax relief measures, including offering rebates on salaries tax, more generous tax allowances for interest on home loans and a deduction of up to HK$200,000 on stamp duty for first-time buyers.