The professional accounting body has urged Hong Kong's government to enact a range of tax and related measures to fuel growth for family offices, companies and other business, thereby driving revenue growth.
Hong Kong should roll out tax incentives to attract companies to establish regional headquarters, boost family office growth, and foster tighter links with Gulf Co-operation Council nations, CPA Australia says.
The Asian city should offer a tax as low as 8.25 per cent, generating revenue to help Hong Kong plug a HK$127 billion ($16.2 billion) fiscal deficit. Hong Kong's corporate tax system, called a profits tax, is territorial and flat rate. The normal rate is 16.5 per cent.
Another CPA Australia proposal is to encourage GCC nations to foster inbound investment into Hong Kong through tax incentives.
The group has also proposed ways to boost the family offices sector.
"When determining if the eligible FIHV [family offices holding investment vehicles] meet the minimum asset under management requirement of HK$240 million, the government should consider allowing a multiplier of 1.5 be applied to investments in Hong Kong listed shares, subject to a cap,” Karina Wong, deputy chairperson of CPA Australia's taxation committee for Greater China, said.
The group’s call for reforms come as Hong Kong is working to recover from the Covid-19 pandemic. Geopolitical shifts, relating to Hong Kong’s relations with mainland China, have also raised Singapore’s relative standing as a wealth management hub, with its family offices for example. Hong Kong, however, is taking steps to attract wealth management business. Other groups that have urged Hong Kong to sharpen incentives include the Alternative Investment Management Association. In June 2023, Hong Kong's government unveiled its “Network of Family Office Service Providers.” The rollout of the network is one of eight initiatives in the government's Policy Statement on Developing Family Office Businesses in Hong Kong, announced on 24 March 2023.
CPA Australia submitted recommendations for possible inclusion into Budget 2024-25 to the Hong Kong government.
"Facing global uncertainties and volatility, many companies are seeking growth opportunities in Asia,” Anthony Lau, co-chairperson of CPA Australia's taxation committee for Greater China, said.
Lau spelled out how Hong Kong can strengthen ties with GCC countries.
“The [Hong Kong] government can discuss with mainland authorities the possibility of exempting mainland withholding tax on interest and dividends that GCC sovereign wealth funds receive from investments in strategic industries through Hong Kong such as sustainable development and emerging technologies," Lau said.
A stamp duty extension could also be given to the shares of Hong Kong private and listed companies GCC's single-family offices holding investment vehicles (FIHV) to invest in, CPA Australia said.
Lau said Hong Kong should improve its appeal as a green and vibrant city for tourists and business.
“For example, the government should extend the Green and Sustainable Finance Grant Scheme to subsidise eligible bond issuers and loan borrowers, which is due to expire this year. The government may also consider offering a 150 per cent super deduction for the cost of acquiring energy-saving machinery and equipment,” Lau said. “A super deduction could also apply to the interest expenses incurred on green bonds issued by Hong Kong corporations. To achieve carbon neutrality, the government should study the possibility of introducing a carbon tax on corporations emitting significant greenhouse gases in Hong Kong starting from 2026 at the earliest. We also suggest increasing fines and penalties for environmental damage."
The government should also offer a 150 per cent super deduction for event sponsorship expenses.
CPA Australia’s Wong said it was also urgent for Hong Kong to sign more comprehensive avoidance of double taxation agreements with jurisdictions – particularly Australia.
"The recently proposed changes to Australia's tax residency rules may significantly increase the tax burden on some of the 100,000 Australian expats residing in Hong Kong due to there being no CDTA signed between two jurisdictions,” Wong said.
“This year, the [Hong Kong] government will implement the new Capital Investment Entrant Scheme (CIES) to enrich the talent pool and attract new capital to Hong Kong. If tax changes similar to what is being proposed in Australia are implemented in other non-CDTA jurisdictions, it may discourage talented people and high net worth individuals from those jurisdictions from moving to Hong Kong. Therefore, we urge the government to increase their efforts to negotiate CDTA with other jurisdictions,” Wong added.