'HK Still Competitive Even With Higher Stamp Duty'

Financial Secretary Paul Chan on Thursday defended his proposal to raise stamp duty on stock transactions by 30 percent despite complaints from lawmakers who said it would undermine Hong Kong's status as an international financial centre.

Chan proposed in his budget blueprint on Wednesday an increase in stamp duty from 0.1 percent to 0.13 percent of the value of transactions.

One day later, lawmakers expressed their misgivings at a Legislative Council Finance Committee meeting.

Christopher Cheung, who represents the financial services constituency, cited big losses in local shares on Wednesday after the budget speech.

He argued that Hong Kong stands to lose more than what it would gain from the tax hike.

"If you increase the stamp duty, there might be fewer transactions, and large corporations may consider again if they want to be listed in Hong Kong.

"This is a long-term impact," Cheung said.

Another lawmaker, Cheng Chung-tai, said the proposal unfairly targets the middle class.

Chan defended his plan, pointing to a rebound in the stock market on Thursday.

He also insisted Hong Kong still has many advantages. “Why is our market appealing? On the mainland, yes, their stamp duty is lower, but they charge other items, there's also foreign-exchange control. Here in Hong Kong, there's free flow of capital, we have a market that is both large in both depth and breadth.

"Apart from stamp duty, other places may charge a dividend tax or capital gains tax, but we don't have that. So even if we increase the stamp duty... we remain highly competitive,” the finance chief said.

Other lawmakers raised questions about relief measures unveiled in Wednesday's budget, focusing on a guaranteed loan scheme for the unemployed and electronic vouchers.

Alice Mak of the Federation of Trade Unions said the loan scheme is a poor substitute for cash assistance to those in need.

She also said apart from those losing their jobs, many employees haven't had enough work and were hit by a sharp drop in earnings, so she called for the loan scheme to cover them as well.

“For those working in the airline industry, they are not sacked but are only paid HK$1,000 to HK$2,000 per month," she said.

"In considering the eligibility, you have to provide flexibility.

"For those who have been underemployed, they should be eligible for the loans as well. And you don't have to worry about abuse, because they have to pay you back."

The financial secretary said expanding the loan scheme would involve complicated issues.

Other lawmakers called on the government to distribute HK$5,000 worth of vouchers in one go, instead of requiring people to use them in instalments before they expire.

Chan defended the arrangement, saying the government wants to pump money into the economy gradually, and that many overseas countries have done the same.

Wong Ting-kwong of the import and export sector expressed concerns about the scheme's administrative cost, estimated at HK$600 million.

Officials said the money would be spent on updating the computer system and identifying suitable e-payment systems, among other things.