XN000022-1996-02-07 — Page 25

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Mr Cheng's has further advocated the use of tax and other incentives to continue to attract key financial services. I note that Ms Loh has considered this unnecessary. As Members know the Financial Secretary will deliver his Budget on 6 March. Today therefore is obviously not an opportune time for me to pre-empt his Budget proposals on taxation matters, if any. Perhaps I should echo what the Financial Secretary has recently alluded to on this subject. It is worth repeating that the standard profits tax rate in Hong Kong is already very low by international standards. It has helped to foster a competitive business environment as a whole and which the financial services sector benefits. If what Mr Cheng meant by tax incentives refer to preferential tax rate for selected industries for a certain period of time, it may compromise our current simple, predictable and easy to understand taxation system. Selective preferential treatment entails picking of winners by the Government and would ultimately be tantamount to Government making commercial decisions on behalf of the private sector - an area which bureaucrats anywhere may not be very good at.

In conclusion, Mr President, maintaining Hong Kong's leading position as an international financial centre is an ongoing challenge which Government is committed to meet and will continue to do so. Come 1997, this will even become a mandatory requirement, as Article 109 of the Basic Law stipulates that "the HKSAR shall provide an appropriate economic and legal environment for the maintenance of the status of Hong Kong as an international financial centre".

Mr President, before I end today, I should express my gratitude for the overwhelming support of Members in working to maintain Hong Kong's leading status as an international financial centre. There is one major initiative which success will greatly enhance such a position. I am referring, Mr President, of course, to the Mandatory Provident Fund (MPF) Scheme. As Members are aware, we have submitted for the approval of the Finance Committee a funding proposal for the MPF Scheme the day after tomorrow. While the System is intended for the much needed but long delayed retirement protection of our workforce, I should take this opportunity to reiterate the very advantageous "side effect" of the MPF System where Hong Kong's financial services sector will be given a timely and invaluable boost on the establishment of the System. The potential benefits to the Hong Kong debt market, fund management and associated sectors and the economic activities so generated are obvious. Mr Paul Cheng has in fact alluded to the importance of fund management having their operation localised in Hong Kong and in our regular and frequent contacts with the fund management industry in Hong Kong, the message is loud and clear - forget about special incentives, not even tax concessions, just get on with the MPF. This is indeed a very substantial and tangible gain for Hong Kong's status as an international financial centre.

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