TNAG-1728-FCO40-2441-Minutes-and-Hansards-of-the-Legislative-Council-of-Hong-Kong-1988 — Page 251

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attractive environment, but all around the world countries are slashing their corporate tax rates. with the proposed 1 per cent reduction here we just are not as competitive as we used to be. Hong Kong's manufacturing sector consists mainly of light industries. Machinery and equipment in those industries tend to have a short life. Any lapse in new investment will soon

This investment show up in the export competitiveness.

inplant and equipment increased by an aggregate of 40 per cent over the last two years, the forecast for this year is just 3 per cent and 1989 could be even worse if the long-awaited recession arrives. The present 55 per cent initial depreciation allowance may seem high to the uninformed, but in real business terms it is not. Both the initial and annual allowances should be made internationally competitive. Another productive tax cut would be the abolition of the withholding tax on the Hong Kong dollar debt instruments. Although the revenue involved is a measly HK$17 million, the Government clings to this levy. Yet this tax effectively blocks the development of a broad-based capital market. This is not

The failure of the just a matter of academic interest.

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recent MTR, bond issue to start greater public involvement was largely because those who might have

25 bought the bonds would have had to pay tax on the interest 26 earned. By discriminating against Hong Kong dollar

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instruments, and thus against companies committed to the growth of Hong Kong, this tax causes Hong Kong companies and the Hong Kong Government money because the capital market has too narrow a base to support funding needs at reasonable interest rates.

It was Winston Churchill who said: There is no such thing

This one is ludicrous! But if the as a good tax,

commercial paper withholding tax is questionable, the 36 Budget's recommendation that annual licence fees for banks