China

Details

  • Service: Tax
  • Type: Press release
  • Date: 2/26/2014

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KPMG’s response to the Hong Kong Budget 2014-15 

26 February 2014

 

KPMG China welcomes the proactive measures being taken by the HK SAR Government to tackle the challenges of an ageing population. KPMG China also supports the various proposed measures to increase Hong Kong’s competitiveness.


Jennifer Wong, Tax Partner, KPMG China, says: “This is a forward looking Budget. The Financial Secretary acknowledges the issues caused by an ageing population and has started taking steps to address this. We are pleased to see the Government reiterating that it will uphold fiscal disciplines. It will also put in place a more vigorous internal control and monitoring mechanism for assessing and prioritising competing funding priorities, with appropriate offsettings from different programmes. Considering establishing a ‘Future Fund’ to prepare for the future is also a responsible decision and a welcome initiative by the Government, as a means of investing the surplus revenues for future needs.”


Wong welcomes proposed relief measures as these will help alleviate rising living costs – the middle class can benefit from income tax reduction, while grass roots communities can continue to get an extra one month of allowances and public rental relief. However, the effect of an increase in parents / grandparents allowances will be minimal.


“We agree with the Financial Secretary’s view that one-off measures such as a rates wavier and tax rebates should only be offered subject to the economic and financial position, while not making them recurring expenditures. KPMG China also supports the Government’s initiative to review fees and charges as this can promote the user-pay principle,” Wong says.


Additionally, KPMG China supports the Government’s plan to review interest deductions for taxation of corporate treasury activities, and clarify the criteria for such deductions. This could enhance Hong Kong’s status as a central or regional treasury hub, by attracting more multinationals coming to Hong Kong to manage their global or regional treasury functions. 


Darren Bowdern, Tax Partner, KPMG China says: “The Government’s proposal to promote the use of Hong Kong as a treasury centre is a welcomed initiative for both Hong Kong corporate groups and other multi-national organizations to consider using Hong Kong as a hub for their treasury operations. The current rules do not adequately support the use of a Hong Kong company as a group treasury vehicle for their regional or global operations.  Amending the rules to ensure symmetry between the taxation of income and the deductibility of the expenses should boost the use of Hong Kong as a favorable treasury centre.”

 
“The Government also made reference to their initiatives with respect to asset management, to further boost the industry in Hong Kong.  The Government will shortly release its consultation on extending the offshore funds exemption to the private equity industry, which should work to better position Hong Kong as a hub for private equity in Asia.  This, in conjunction with the Government’s discussion with the Mainland on Mutual Recognition and the possible introduction of new rules for Open Ended Investment Companies should all work to promote Hong Kong as one of the leading Asset Management centres in the world,” Bowdern says.


“The proposed iBond issue of up to HKD10 billion is disappointing. The Government could consider increasing the scale as there is market demand, it can also promote the development of Hong Kong’s debt market,” Wong adds.


KPMG China welcomes the Government’s continuous measures to support local SMEs in financing, market expansion, brand building and productivity enhancement. However, Wong hopes the Government will provide additional support such as rental subsidies or a dedicated zone to provide rental costs relief for SMEs.


Wong adds: “While the proposed measures may help to enhance Hong Kong’s competitiveness, the Government should continue to assess ways to stabilise the revenue stream, whilst not relying heavily on the current narrow tax base.  By upholding fiscal discipline and fiscal prudence principle, I hope the Government can work together with the community to find a solution for upcoming challenges of an ageing population and potential fiscal deficit.”


Bowdern concludes: “The Financial Secretary also announced that they would be stepping up their enforcement of the tax rules to combat tax evasion and avoidance.  This announcement is clearly a reference to the OECD’s global initiatives on Base Erosion and Profit Shifting to tackle perceived abusive tax arrangements. This demonstrates Hong Kong’s commitment as a responsible member of the international community with respect to fiscal matters and combating tax evasion.”

 

- Ends -

 


About KPMG


 

KPMG is a global network of professional firms providing Audit, Tax and Advisory services.  We operate in 155 countries and have 155,000 people working in member firms around the world.  The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.


KPMG China has 16 offices in Beijing, Shanghai, Tianjin, Shenyang, Nanjing, Hangzhou, Fuzhou, Xiamen, Qingdao, Guangzhou, Shenzhen, Chengdu, Chongqing, Foshan, Hong Kong SAR and Macau SAR, with around 9,000 people.


KPMG China refers to the member firms of KPMG International in Mainland China, Hong Kong SAR and Macau SAR.

 

Our commentaries on the latest Hong Kong Budget Summary

 

Hong Kong Budget Summary www.kpmg.com/cn/en/hk-budget 

 

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