Despite a number of financial support measures proposed by the Hong Kong government, Hong Kong stocks are still falling, and the recovery of the financial industry has not been as expected. However, the industry has different stances on the reduction of stock stamp duty, and some industry insiders believe that there is no room for adjustment in stock stamp duty considering the current financial situation. Some industry members also believe that lowering the tax rate can enhance investment confidence and stimulate Hong Kong stock trading. It is also recommended that the authorities launch more infrastructure securitisation projects to reduce the financial burden.
The reduction of stock stamp duty does not mean that the stock market will recover immediately, but it shows that the Hong Kong government supports the development of the local capital market, giving foreign investors and local citizens the confidence to continue investing in Hong Kong stocks. He stressed that in the long run, the government must review indirect taxes, not necessarily involving sales tax, and hoped that the Budget would provide a roadmap, such as introducing new indirect taxes in three years or broadening the tax base.
A reduction in stamp duty on stocks may not be attractive
CPA Australia Greater China Chapter President Yip Yunkai also hopes that the government can consider market performance and fiscal conditions to explore whether there is room for further cuts to help stimulate the stock market, such as lowering the stamp duty rate on stocks to be on par with the mainland, while only imposing a 0.05% tax on sellers.
However, Huang Mingwei, director general of the Hong Kong Chamber of Listed Companies, believes that the stock stamp duty "was reduced last time, but it has no practical effect, and the stock market is still very weak, even if it is reduced, some people feel that they can't make money by playing the stock market now, even if it is free, it may not attract them (investors)", and added that the exemption of stock stamp duty is a good thing, "if you do it well, you don't do it", but the focus is whether it is effective, and according to the government's financial situation, there seems to be not much room for reduction. The Chamber of Commerce focuses on how to stimulate stock market trading and market liquidity, hoping that the government can explore more sources of funds.
Qi Weizhi, a tax partner at Deloitte China, added that after the earlier reduction in the stock stamp duty rate, Hong Kong stocks still fell, believing that the effect of tax reduction measures was limited, and believed that the weakness of Hong Kong stocks was not only caused by high stamp duty, but also other external economic problems. Therefore, there is no proposal to adjust the stock stamp duty in this Budget to avoid exacerbating the fiscal deficit problem. She also pointed out that she expects the "Budget" to include measures to encourage companies to list in Hong Kong, such as the Hong Kong government can allow the deduction of initial public offering fees, up to a maximum of $500.
In terms of funds, family offices and MPFs, Qi Weizhi proposed to abolish or further relax the "5%" carried income threshold under the tax exemption regime for funds and single family offices, that is, to provide tax exemption on interest income from funds and single family offices on debt investments that are qualifying assets, in line with the change of the exemption regime for offshore passive income in January last year. She also suggested that fund management companies and single family offices in Hong Kong that provide services to family offices should provide tax concessions under certain conditions, such as halving the profits tax rate to 8.25%.
Yip also pointed out that it is proposed to expand the scope of tax concessions for family offices to include fixed income products, antiques, art and virtual assets, as well as stamp duty exemption for Hong Kong private and listed companies traded by single family offices from the GCC through family investment vehicles for a period of three years.
The Chief Executive Officer of the Hong Kong Investment Funds Association, Mr Wong Wong Tsz-ming, pointed out that it is proposed to adjust the tax deductible amount of $6,000 on MPF, giving half of the tax concession to MPF and half to other parties.
KPMG expects a fiscal deficit of 130 billion
In addition, due to the decrease in land-related income and stamp duty revenue, KPMG, an international accounting firm, expects Hong Kong to record a deficit of $130 billion in the 2023/24 financial year, and as of the end of March this year, Hong Kong's fiscal reserves were $705 billion.
