This undated photo shows the Inland Revenue Department at Wan Chai, Hong Kong. Secretary for Financial Services and the Treasury James Lau Yee-cheung said the city’s proposed two-tier profits tax reform will cost the government HK$5 billion in diminished receipts. (ROY LIU / CHINA DAILY)
HONG KONG – The proposed two-tier profits tax reform will cost the government HK$5 billion in diminished receipts, Secretary for Financial Services and the Treasury James Lau Yee-cheung said on Wednesday.
“We regard the profit-tax revenues forgone as an investment in our real economy. The investment will bestow long-term positive multiplier effects on the development of innovation, entrepreneurship and financial technology industry in Hong Kong,” Lau told reporters.
READ MORE: Two-tier profits-tax package ready
The administration expects relevant legislative amendments will be submitted to the Legislative Council in the second half of next year, Lau added.
Financial Secretary Paul Chan Mo-po said on Monday that the city’s profits-tax reform is ready and it is up to Chief Executive Carrie Lam Cheng Yuet-ngor to decide when to announce the package.
During her election campaign, Lam promised to lower the tax rate for the first HK$2 million profit from the current 16.5 percent to just 10 percent, in a bid to ease the burden on small and medium-sized enterprises.
The city’s finance chief Chan earlier estimated the profit tax receipts forgone would constitute 3.8 percent of the city’s total profit-tax revenue.
Profits tax is the single biggest contributor to government revenue. According to Financial Services and the Treasury Bureau data, the HK$140 billion profits tax collected in the 2015-2016 fiscal year accounted for 31.2 percent of the government’sHK$450 billion revenue. This was followed by stamp duties (13.9 percent), land premium (13.5 percent) and salaries tax (12.9 percent).
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