XN000022-1994-06-15 — Page 23

WEDNESDAY, JUNE 15, 1994

7

TWO BILLS HELP GROWTH OF SECURITIES MARKET

**

TODAY

TWO BILLS INTRODUCED INTO THE LEGISLATIVE COUNCIL (WEDNESDAY) ARE EXPECTED TO ENCOURAGE THE DEVELOPMENT OF AN ACTIVE STOCK BORROWING AND LENDING MARKET IN HONG KONG.

THEY ARE STAMP DUTY (AMENDMENT) (NO. 2) BILL 1994 AND REVENUE (AMENDMENT) (NO. 2) BILL 1994.

INLAND

"THIS WILL HELP TO IMPROVE OUR COMPETITIVENESS WITH OTHER MAJOR SECURITIES MARKETS, IN PARTICULAR THOSE WHICH HAVE BEEN TRYING то ATTRACT MAJOR PLAYERS FROM THE HONG KONG MARKET TO ESTABLISH STOCK BORROWING AND LENDING OPERATIONS IN THEIR OWN JURISDICTIONS,' THE SECRETARY FOR FINANCIAL SERVICES, MR MICHAEL CARTLAND, SAID.

זי

(NO. 2) CURRENT

MOVING THE SECOND READING OF THE STAMP DUTY (AMENDMENT) BILL 1994, MR CARTLAND SAID IT PRIMARILY SOUGHT TO RELAX THE RESTRICTIONS ON STAMP DUTY RELIEF FOR STOCK BORROWING AND LENDING ACTIVITIES.

THE GOVERNMENT RECEIVED SUBMISSIONS THAT SUCH RESTRICTIONS WERE HINDERING THE DEVELOPMENT OF A STOCK BORROWING AND LENDING MARKET, HE SAID.

THAT IN TURN HAS BEEN DISCOURAGING SHORT-SELLING ACTIVITIES AND OTHER MARKET DEVELOPMENT MEASURES, HE ADDED.

LENDING

AT PRESENT STAMP DUTY IS NOT PAYABLE ON A STOCK BORROWING AND

TRANSACTION UNDER CERTAIN SITUATIONS.

THE TRANSACTION HAS TO BE CARRIED OUT BY AN "APPROVED BORROWER" FOR THE "SOLE PURPOSE" OF SETTLING A SALE OF HONG KONG STOCK EFFECTED IN THE LOCAL STOCK EXCHANGE AND THE BORROWED STOCK MUST BE RETURNED WITHIN 14 DAYS.

THE BILL PROPOSES TO EXTEND THE STOCK RETURN PERIOD FROM 14 DAYS TO 12 MONTHS OR SUCH LONGER PERIOD AS THE COMMISSIONER OF INLAND REVENUE MAY ALLOW AND TO REMOVE THE "APPROVED BORROWER" REQUIREMENT.

IT ALSO SEEKS TO REPLACE THE "SOLE PURPOSE" REQUIREMENT WITH A NUMBER OF "SPECIFIED PURPOSES" SUCH AS THE BORROWING OF STOCK FOR SETTLING A FUTURE SALE, FOR ON-LENDING TO ANOTHER PERSON OR FOR SETTLING A SALE OF STOCK EFFECTED OUTSIDE HONG KONG.

TO DETER NON-COMPLIANCE, THE PENALTY FOR A FAILURE то COMPLY WITH THE RELEVANT REQUIREMENTS UNDER THE STAMP DUTY ORDINANCE IS TO BE INCREASED FROM $1,000 TO $5,000.

THE INLAND REVENUE (AMENDMENT) (NO. 2) BILL 1994 SEEKS TO INTRODUCE TECHNICAL AMENDMENTS TO THE INLAND REVENUE ORDINANCE ΤΟ CLARIFY THE PROFITS TAX TREATMENT OF A STOCK BORROWING AND LENDING TRANSACTION AND COMPENSATORY PAYMENTS ARISING THERE FROM.

IT PROPOSES TO TREAT A DISPOSAL AND REACQUISITION OF SECURITIES UNDER A STOCK BORROWING AND LENDING ARRANGEMENT AS A LOAN TRANSACTION IN THE CONTEXT OF THE ORDINANCE. AS A RESULT, NO PROFIT OR LOSS WILL EMERGE FOR PROFITS TAX ASSESSMENT.

DEBATES ON THE TWO BILLS WERE ADJOURNED.

/B