Spend Wisely to Enhance the Business Environment
In the Chamber’s Budget Submission that we sent to Financial Secretary Paul Chan on 24 January, we suggested a range of measures that we hope he will consider as he draws up his plans for the coming year.
One area where we believe there is room for improvement is taxation. Our tax system has long been a cornerstone of Hong Kong’s success, but many neighbouring cities have emulated our tax appeal so are now snapping at our heels.
To help us stay competitive, we suggested implementing targeted tax concessions to encourage more multinational companies to set up their regional headquarters here.
Further measures to encourage R&D would attract overseas investors and also help the Government to fulfill its promise to increase its talent supply and support for the innovation and technology sectors.
The Government’s decision to introduce super-tax deduction for R&D expenditure is very welcome. To encourage more R&D activity, we suggest extending this deduction to Hong Kong-based companies with wholly-owned subsidiaries engaged in R&D in the GBA. We also suggest reviewing the various government funding programmes to make it easier for qualified applicants to obtain funding support.
More needs to be done, however, if Hong Kong is to realise its ambition of becoming a centre for innovation and technology because other jurisdictions have been using their fiscal tools very aggressively and our tax competitiveness has been seriously eroded as a result. One option is a “patent box” regime, which lowers the tax on income from patents. This has been successful in attracting innovative companies to other jurisdictions such as Ireland.
In our submission, we also call for an upgrade of the Government’s current method of reviewing regulations. Hong Kong needs to cut red tape and get rid of out-of-date laws that are hindering business growth. Introducing a robust Regulatory Impact Assessment system would not cost a great deal to implement or require a major overhaul of current practices.
And, speaking of spending money, at Budget time we are reminded of Hong Kong’s massive and growing fiscal surplus. Of course, having a budget surplus is something to celebrate. But we question whether the Government should continue to sit on such a huge pile of cash at a time when the business environment is faced with such an uncertain future.
As 2019 gets underway, no one has a crystal ball. A recession or serious downturn may not be imminent, but even so, many local businesses are already being affected by the current uncertainty that is prevailing around the world. So we hope that the Government will not shy away from using some of its reserves to ensure Hong Kong is prepared for any shocks that lie ahead.
We hope that the Financial Secretary will take on board our suggestions to ensure that the business community can continue to play its part in the growth and prosperity of Hong Kong. We are also looking forward to the Joint Business Community Luncheon on 19 March, which will give us the opportunity to hear directly from the Financial Secretary about his Budget plans and proposals.
Posted on 2019/02/01