One in every of Hong Kong’s most senior officers has promised enterprise that the territory’s standing as a “tax haven” is protected regardless of political and financial turmoil as the town fends off rivals to its regional monetary hub function.
Matthew Cheung, the town’s highest rating bureaucrat, additionally stated Hong Kong’s revered judges wouldn’t need to swear a brand new oath to China and its ruling Communist occasion as the federal government cracks down on dissent within the metropolis’s civil service.
“You may relaxation assured that for a while Hong Kong will nonetheless stay a tax haven — very low tax in Hong Kong is assured, overseas traders don’t fear about it,” Cheung, Hong Kong’s chief secretary for administration, stated in an interview with the Monetary Instances.
Hong Kong has lengthy used its low revenue tax charge of 15 per cent to woo international companies, together with different advantages equivalent to no capital positive aspects, dividends or gross sales taxes.
However current upheaval within the metropolis, together with violence surrounding pro-democracy protests in 2019 and the coronavirus pandemic, have hit the financial system and elevated hypothesis the town is perhaps compelled to extend taxes to fill a fiscal hole. That might harm its competitiveness towards rival monetary centres within the area, equivalent to Singapore.
Hong Kong has forecast a document price range deficit of HK$139bn ($17.9bn), or 4.8 per cent of gross home product, within the subsequent monetary yr, after recording its first deficit in 15 years in 2019-20.
The town final month rocked financial markets with an sudden enhance in stamp responsibility on fairness trades from 0.1 per cent to 0.13 per cent.
Cheung is Hong Kong’s second-highest official after Chief Govt Carrie Lam, who was appointed by an election committee of largely pro-Beijing figures.
Hypothesis the federal government may need to lift spending has additionally been sparked by stress from Beijing for Hong Kong to do extra to handle inequality in a metropolis dominated by property billionaires.
Whereas taxes in Hong Kong are low, the federal government and the tycoons have historically made cash by means of sky-high leases and actual property costs, making the town one of many world’s most costly.
However Cheung stated Beijing had instructed the native authorities to focus far more on “grassroots” pursuits and low-income employees.
“[Beijing] made it fairly clear we have now to crack the onerous nut . . . We are going to crack the onerous nut, the onerous nut is housing, land, the wealth hole and so forth,” Cheung stated.
“Within the new panorama . . . some vested pursuits might need to compromise.”
He didn’t present additional particulars on how the federal government would tackle the housing difficulty. However he stated efforts to resolve the wealth hole wouldn’t, for now, contain tax will increase because it was not the precise time to “tinker” with the tax system.
Cheung additionally sought to reassure overseas traders that the federal government wouldn’t tamper with the town’s common law legal system, one other key attraction for worldwide corporations.
Considerations over the courts comply with efforts by Beijing to rein within the pro-democracy motion after the 2019 protests by imposing a nationwide safety legislation on the town and legislative reform to vet election candidates.
The federal government has additionally begun a purge of the civil service, requiring workers to swear a brand new oath to the state to assist weed out these not thought of “true patriots”. As many as 200 bureaucrats are more likely to be compelled out of the civil service after they refused to signal the loyalty oaths.
However Cheung stated the judicial oath historically sworn by judges to uphold Hong Kong’s mini-constitution, the Fundamental Legislation, was “sufficient” in Beijing’s eyes.
He pledged that the town may bounce again from its troubles, helped by its efforts to combine with its hinterland in mainland China, often known as the Higher Bay Space.
“Those that go away Hong Kong will remorse it, they are going to come again,” Cheung stated.