Letters from leaders of Hong Kong's political parties and government departments.
You may have already heard about our Chief Executive’s first Policy Address on Wednesday. Carrie Lam broke with tradition in her maiden policy address, delivering the highlights of her speech to help citizens focus on the vision and mission of her administration in the coming five years. The act itself showcased her new governance style. And I am particularly delighted to see how actively the public have been engaged in discussing her new moves.
One key initiative spelt out by Carrie Lam is a huge reduction to profits tax. Profits tax on the first HK$2 million a business makes will be halved to 8.25 per cent. Profits beyond that will still be subject to the standard rate of 16.5 per cent. To encourage research and development (R&D), it is also proposed that the first HK$2 million eligible R&D expenditure will get a 300 per cent tax deduction, with the rest at 200 per cent.
This is simply unexpected good news for local start-ups and SMEs. Hong Kong is known as an important financial, trade and transport hub with many investors eager to do business in this city. However, a lot of SMEs and start-ups nowadays are facing tough challenges, including rising operational costs in rents and wages, and stiff competition from neighbouring economies. The reduction of profits tax will no doubt help ease the heavy burden of SMEs. We also welcome the tax breaks for companies that invest in R&D as this will foster the growth of local SMEs and start-ups and ultimately promote the development of innovation and technology in Hong Kong. We hope that the government will continue to provide more support for the city’s innovative industries.
Still, we urge Carrie Lam to reconsider cutting the overall standard profits tax rate from 16.5 per cent to 15 per cent. In the face of fierce competition from neighbouring cities, Hong Kong’s low-tax regime is gradually losing its attractiveness to investors. Therefore, we need to prescribe effective doses for the tax reform in order to catch up with our competitors otherwise we will risk losing our edge.
As the government is going to host a “Summit on the New Directions for Taxation”, I hope it can keep an open mind about reforming the city’s tax regime and be receptive to new ideas. For example, we can seek talks with relevant mainland departments over the possibility of extending Hong Kong’s tax measures in the Greater Bay Area as a pilot scheme? This can be a win-win for investors as it will enhance the economic performance in the Area while consolidating the interests of the stakeholders.
As to Lam’s proposal to expand the convention and exhibition facilities in Wan Chai, I think it is vital to the city’s commercial development as this will facilitate the development of the manufacturing and services industries. As the current Convention and Exhibition Centre has constantly been fully booked with a long waiting list, the lack of these facilities will adversely affect Hong Kong’s business development. The Trade and Development Council and the business sector have repeatedly requested the government to build the third phase of the Convention and Exhibition Centre because investors will be forced to look for elsewhere for promoting their products and businesses without a proper venue. Now the proposed extension project will add about 23,000 square metres of additional convention and exhibition facilities, with other facilities such as hotels and Grade A office space. We should give our full support to the project, otherwise Hong Kong will miss many opportunities to host some of the large-scale events.
On the housing front, I think it is important to help young families climb up the housing ladder. For tackling this issue, Lam announced a new subsidised “starter homes” scheme providing about 1,000 residential units for the affordable families to purchase homes. I believe his scheme can make more young people become homeowners and bring hope to the young community. However, the government first needs to resolve the matter of finding adequate supply of land to meet the huge housing demand. Also, can we open discussions again on the import of workers to meet the immense demand of manpower in the construction industry? I hope that the government can find ways to tackle such long-standing problems.
Only in its 100 days in office, the new administration has already mapped out a blueprint for the city’s long-term economic development and gradually rolled out some effective measures. I hope the public will learn to appreciate the good will of the government and whine less over trivial matters. Hong Kong can no longer afford to remain stagnant amid rapid progress in neighboring economies. We need to be pragmatic in approaching different issues and allow time for the government to implement new policies. The government won’t be able to act efficiently if some of us deliberately make things difficult for it.
The Trade and Industry sector sincerely hopes that the government can adopt innovative thinking to deal with issues that we are most concerned about and enhance inter-departmental communication and cooperation, all for a better future for Hong Kong.