Push for reduction in stocks stamp duty

Updated: 2015-01-09 05:34

By Celia Chen in Hong Kong(HK Edition)

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This is the time of the year for business people and professionals to begin lobbying the government for tax breaks, and their hopes have been raised by the forecast of a budgetary surplus by Financial Secretary John Tsang Chun-wah.

The focus of financial professionals naturally falls on the reduction of stamp duty which, they said, should be reduced to lower stock transaction costs to help further enhance Hong Kong's position as a premier fund-management center.

All securities listed on the Hong Kong Stock Exchange are subject to a stamp duty at a rate of 0.1 percent on the value of the transaction, on both the buyer and seller.

The 10 basis-point rates may sound low, but it is enough to discourage high-frequency stock traders from dealing in the city's market, Hong Kong fund managers said.

"The stamp duty could be reduced further, but is less likely to be canceled as it accounts for much of the government's fiscal revenue," said Peter Lai, a senior counselor at CASH Financial Services Group Ltd.

Push for reduction in stocks stamp duty

Phillip Securities (HK) Ltd director Louis Wong Wai-kit agreed, saying that 10 basis-point rate of stamp duty on shares transactions seems high compared to brokerage commissions which have dropped substantially in recent years.

"Day traders, of course, care about adjusting the stamp duty rate as they trade frequently in a sluggish market when prices move within a narrow band," he said. Some stock investors have blamed the stamp duty for constricting price velocity and depressing market turnover on the local bourse, but others believe that its effect can only be felt in a weak market.

"Any cut in the stamp duty rate could lift turnover, but we cannot expect it to be raised much," Lai said. "The stamp duty is definitely not the decisive factor in long-term investment strategies."

A multiple of advantages have enabled Hong Kong to maintain its status as Asia's leading fund-management center. For instance, the absence of any capital gains tax is a great attraction for international investors, financial professionals said.

What's more, "the low and simple tax regime in Hong Kong seems more attractive than the investment environment in Europe and the US", Lai said.

However, the prevailing opinion among financial professionals is that there is room for cutting the stamp duty, especially when the government is projecting a budgetary surplus for 2015 and beyond.

"More retail investors, especially those from mainland, will deal in the Hong Kong market if the stamp duty rate is cut," Lai added.


(HK Edition 01/09/2015 page8)