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I would like to first outline the background. In January 1992, Members approved amendments to the Stamp Duty Ordinance (Cap. 117). Among other things, these amendments required stamp duty to be paid on all agreements for sale of residential property. By contrast, stamp duty was previously only payable on the assignment of the property.
This measure was one of a series of action to curb speculation in residential property. It is a disincentive to those who speculate on property in the period between the conclusion of a sale agreement and the assignment. Apart from the additional stamp duty a speculator has to pay for each sale before assignment, the speculator also has a potential profits tax liability. The information on sale agreements provided to the Commissioner of Inland Revenue under the measure enables him to identify property transactions which may be liable to profits tax. This ensures that the speculators pay the fair share of their profits tax liability. The cost of speculation has therefore been significantly increased. Genuine home-buyers are not affected by this measure except insofar as they have to pay stamp duty slightly earlier.
Under the terms of the original amendments, the measure would have expired at midnight on 31 December 1993. The intention was to allow both the Administration and Members the opportunity to examine all relevant factors before deciding whether the measure should be extended. On 15 December 1993, Members approved a resolution to extend the measure for two years until 31 December 1995.
The residential property market today
The residential property market has gradually softened. The problem of speculation has now been largely contained. This is the combined effect of measures proposed by the Inter-departmental Task Force on Land Supply and Property Prices, mortgage lending policy of banks, changes in interest rates, as well as the increased cost of speculation as a result of the stamp duty measure. It is therefore important that the stamp duty measure be extended. Otherwise, it would send a wrong signal to the market that the Government no longer wished to curb speculation in residential property. There would also be a significant risk that speculation may be rekindled to the detriment of genuine home-buyers.
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