One of Hong Kong’s top officials has promised companies that the territory’s status as a “tax haven” is secure despite political and economic turmoil as the city pushes back rivals in its role as a regional financial center.
Matthew Cheung, the city’s top official, also said that Hong Kong’s respected judges would not have to take a new oath for China and its ruling Communist Party as government. repressed on dissent in the city’s civil service.
“You can be assured that for a while Hong Kong will remain a tax haven – very low taxes in Hong Kong are guaranteed, foreign investors don’t care,” said Cheung, chief secretary of the administration of Hong Kong, in an interview. with the Financial Times.
Hong Kong has long used its low 15% income tax rate to appeal to global companies, along with other perks such as no capital gains, dividends, or sales taxes.
But recent upheavals in the city, including violence surrounding pro-democracy protests in 2019 and the coronavirus pandemic, have hit the economy and heightened speculation that the city may be forced to raise taxes to fill. a budget deficit. This would hurt its competitiveness against rival financial centers in the region, such as Singapore.
Hong Kong projects a record budget deficit of HK $ 139 billion ($ 17.9 billion), or 4.8 percent of gross domestic product, in the next fiscal year, after recording its first deficit in 15 years in 2019-2020.
The city last month rocked the financial markets with an unexpected increase in the stamp duty on share transactions from 0.1% to 0.13%.
Cheung is Hong Kong’s second-highest official after chief executive Carrie Lam, who was appointed by an election committee made up mostly of pro-Beijing figures.
Speculation that the government may need to increase spending has also been sparked by pressure from Beijing for Hong Kong to do more to tackle inequality in a city dominated by real estate billionaires.
While taxes in Hong Kong are low, the government and tycoons have traditionally made money from rentals and sky-high real estate prices, making the city one of the most expensive in the world.
But Cheung said Beijing had asked the local government to focus much more on “grassroots” interests and low-income workers.
“[Beijing] it has been very clear that we have to crack the tough nut. . . We will crack the hard nut, the hard nut is housing, the land, the wealth gap and so on, ”Cheung said.
“In the new landscape. . . some special interests may have to compromise. “
He did not provide further details on how the government would approach the housing issue. But he said efforts to resolve the wealth gap will not, for now, involve tax increases because now is not the right time to “tinker” with the tax system.
Cheung also sought to reassure foreign investors that the government would not change the common law legal system, another key attraction for international companies.
Concerns about the courts follow Beijing’s efforts to curb the pro-democracy movement after the 2019 protests by forcing a national security law on the city and legislative reform to scrutinize election candidates.
The government has also started a purge of the public service, forcing employees to take a new oath to the state to help weed out those who are not considered “true patriots.” As many as 200 bureaucrats are likely to be kicked out of public service after refusing to sign loyalty oaths.
But Cheung said the judicial oath traditionally sworn by judges to uphold Hong Kong’s mini-constitution, the Basic Law, was “sufficient” in Beijing’s eyes.
He vowed the city could bounce back from its turmoil, aided by its efforts to integrate into its hinterland in mainland China, known as the Greater Bay Area.
“Those who leave Hong Kong will regret it, they will come back,” Cheung said.