Abstract

This paper addresses key tax issues and suggests measures to improve the competitiveness of the Hong Kong taxation system. With the enactment of new legislation, Hong Kong is now able to adopt the latest internationally agreed standard of exchange of information by concluding comprehensive double taxation agreements with its trading partners. The expanded treaty network provides added clarity and certainty to the allocation of taxing rights and the tax treatment for international transactions. To broaden the current narrow tax base, we suggest the following measures: introduce a land-related taxation, modify the scope of charge in profits tax, promulgate detailed statutory source-of-profits rules, and implement a mini capital gains tax. By so doing, the Hong Kong government revenue will be less susceptible to economic cycles, and tax efficiency will be enhanced as most controversial tax dispute areas will have been removed.

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