Promoting Asset Management
32. Hong Kong is already a
management centre in
. In 2003,
total assets of our fund management business amounted to
$2,950 billion, of which $1,860 billion were sourced
from overseas investors and accounted for 63 per cent of
the total. The
potential to expand our asset management business
remains considerable, given the vast pension scheme
assets held by banks, fund managers and insurance
, coupled with the continued growth of personal savings
in the Mainland.
The Government has
consulted the industry on our proposals to exempt
offshore funds from profits tax.
We will shortly introduce the necessary
legislative amendments into this Council.
To promote the further
development of our asset management business, the
Government last year consulted interested parties and
the public at large on the abolition of estate duty.
While abolition and retention both have their
pros and cons, the majority view tends to support
Those who oppose abolition
consider that estate duty, which is imposed on the
better-off in society, is in line with the principle of
are also of the view that this duty is not an important
consideration in investment decisions.
Some are even concerned about the possible impact
of abolition on certain professions.
They have pointed out that, if the duty is
abolished, the Government will lose a stable source of
income and suffer a reduction in revenue, and the fiscal
deficit will be aggravated.
Those in support of
abolition take the view that, although the tax is
targeted at the better-off, in practice the latter may
avoid it through various legal means.
Of the dutiable cases processed by the Inland
Revenue Department last year, about 70 per cent
involved assets with an estate value, after exemptions,
below $20 million. They
point out that, in other places, estate duty avoidance
is also very common and it is no easy task to plug these
think that, as the assessment of estate duty takes time,
and the assets of citizens, particularly operators of
small and medium enterprises (SMEs), may be frozen
during the assessment period, this causes them cash flow
settling estate duty, some enterprises may have to sell
their assets to raise cash and as a result encounter
In recent years, global
financial services have experienced phenomenal growth.
The financial markets in the Asia Pacific region
have also quickened the pace of their development.
is looking at unprecedented opportunities in this
sector, but at the same time faces increasing
number of countries in the region, including
, have abolished estate duty over the past 20 years.
have also abolished the tax.
We understand that one of the main reasons for
the decision by some countries to abolish estate duty is
the adverse impact on SMEs.
Investment decisions are
influenced by many factors.
It is impossible for us to give an accurate
estimate of the amount of foreign and domestic
investment that will be induced if estate duty is
we believe that, with its abolition,
will become more attractive to investors.
Many members of the industry envisage that
abolition will encourage more people to hold assets in
through a corporate vehicle or trust.
More overseas companies and professionals will
come here, and this will facilitate the further
development of our asset management services, create
more employment opportunities, and in turn make
more competitive as an international financial centre.
Trading in the financial market will also become
more active, and contribute additional government
revenue from stamp duty and other taxes.
On balance, after
weighing these factors, I propose to abolish the tax and
will introduce the relevant bill into this Council as
soon as possible.
The financial services
industry is a high value-added industry and very
important to our economy: its direct contribution is 13 per cent
of GDP. The
industry also fosters growth in a number of professional
services, and this in turn becomes a strong driving
force for other sectors, such as real estate and the
consumer market. With
globalisation of the industry, the flows of capital,
financial talent and expertise have become easier and
more frequent, and have created new opportunities for
. I hope
that the foregoing measures will encourage the further
development of our financial services industry and
strengthen our position as an international financial