Govt To Raise Stamp Duty On Stocks By 30 Percent

The government said on Wednesday it will increase stamp duty on stock transfers by 30 percent – from 0.1 to 0.13 percent of the transaction value – but ruled out raising other taxes for the time being as the government remains focused on reviving the ailing economy.

Financial Secretary Paul Chan announced the move in his latest budget speech, saying the tax increase will affect both buyers and sellers.

He stressed that the authorities had duly considered the impact of the tax hike on the securities market and Hong Kong’s international competitiveness.

“The Government will continue to spare no efforts in introducing measures to facilitate the development of the securities market, so as to take our financial services sector to the next level,” he said.

Shares of Hong Kong Exchanges and Clearing plunged 12 percent to below HK$500 following the announcement, with the stock operator expressing its disapproval of the move.

"Whilst we are disappointed about the Government's decision to raise stamp duty for stock transactions, we recognise that such a levy is an important source of Government revenue," an HKEx spokesman said.

Jackson Wong, an asset management director at Amber Hill Capital, said the tax increase will affect Hong Kong’s competitiveness, and could even discourage small retail investors from trading.

"The overall trend of lowering fees with all these technology advancement around the world is really on the move, while the Hong Kong government is trying to raise the stamp duty, I think it's a little bit against the trend," he said.

"I think it would hurt a little of the competitiveness going forward," he added, while noting that the SAR still has lower fees than many of its regional competitors such as Singapore and South Korea.

Chan said the hike could disproportionately affect local brokerages that mainly serve retail investors.

"We might expect less trading once the market are cooling down around the world or the Hong Kong market is not on a bull run," he explained.

In his budget speech, the Financial Secretary also said he had received many proposals to introduce new taxes during the consultation process, but concluded that it is premature to consider these suggestions, with Hong Kong's economy having contracted 6.1 percent last year.

“Fighting the epidemic and reviving the economy are our current priorities. This is not the time to introduce new taxes,” he stressed.

Chan added that both businesses and individuals are generally under “considerable financial pressure” due to the effects of the pandemic, and now is “not the appropriate time to revise the rates of profits tax and salaries tax, which are our major sources of revenue.”

But he added that authorities will continue to review the situation and make the necessary adjustments when appropriate.

The Financial Secretary also announced a review of Hong Kong’s rating system, saying officials will look into whether progressive rates can be introduced, introducing concessions to property owners who live in their own flats, and consider shifting the primary liability for payments from the occupier to the owner.

Chan said the government would consult the Legislative Council on any proposed changes to the rating system.

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