Hong Kong Budget Submission 2024-25

Mr. Paul CHAN Mo-po, GBM, GBS, MH, JP
Financial Secretary
25/F, Central Government Offices
2 Tim Mei Avenue
Tamar
Hong Kong

By email: [email protected]; [email protected]

1 February 2024

Dear Paul,

Submission: Hong Kong Budget Consultation 2024-25

AICPA & CIMA, together as the Association of International Certified Professional Accountants, welcomes the opportunity to contribute to the Hong Kong Government's 2024-25 budget preparations.

As CIMA, the professional body for management accountants, we are engaged with many governments around the world who are all facing the same challenges; how to drive productivity and innovation, create opportunities for all members of society, generate sustainable growth, and ensure that the workforce of today and tomorrow is equipped with the skills that employers need.

We recognise that the external environment will present its own challenges for Hong Kong but there is a window of opportunity for Hong Kong and the Greater Bay Area to focus on the investments needed to drive long term prosperity and economic growth. We remain committed to supporting the Hong Kong Government's aspirations to promote policies which will encourage productivity and growth, ensure Hong Kong and the Greater Bay Area remain a location of choice for global business and top talent, including management accountants (who are critical to prosperous private and public sectors).

The primary message of our Hong Kong Budget 2023-24 submission was the need to future-proof the skills pipeline in Hong Kong. Whilst this should remain an ongoing priority, we consider that for the 2024-25 Budget there is a need to focus on the long-term attractiveness of Hong Kong in order to best support its ambition as a centre for top talent.

Build a Strong Fiscal Economy

Broaden the Tax Base

AICPA & CIMA has recently published a report examining the link between taxation, productivity, and wider economic growth. We enclose a copy of this report, titled "Tax and Productivity". There is a clear message that taxation is a strong incentive for driving productivity and attracting business and top talent to a region or country.

Our study considered the tax position of a number of countries around the world with productive economies, including Australia and Singapore. There is much that Governments can learn from each other about the key drivers of a successful economy. Whereas some countries look to maintain high taxes, raise revenue through higher taxes or increase public charges, others seek to broaden the tax base.

Hong Kong could explore a number of opportunities to broaden the tax base, including the range of products which are subject to taxation. In Hong Kong, the tax on entrepot trade might be an area for consideration. In many economies tobacco and intermediary trade of e-cigarettes and wine and spirits would be other obvious categories for review.

We recognise that Hong Kong is striving to support its retail sector in a post pandemic environment and therefore the scope to implement a sales tax might be limited at this time, but the Government could carry out a feasibility study to assess the impact of the prospective implementation of a low-rate sales tax, with the ability to refund any tax paid by inbound visitors (making Hong Kong an attractive shopping destination would support the retail sector). A sales tax policy is widely adopted by other economies around the world.

These are specific tax related measures which our members in Hong Kong have identified but more broadly there is a need for a more substantive review of the tax administration system to position Hong Kong for the future.

Taxation as an Incentive for Self-Learning

Under the Salaries Tax, self-education expenses are deductible for salary tax, however, it is limited to courses being offered in Hong Kong. It does not enable residents to enjoy the same self-education deduction through online study with overseas course providers. If the primary driver is to build a highly skilled workforce for Hong Kong, then the tax benefits for individuals to access online learning with top education providers around the world could offer a strong incentive for residents to pursue self-earning.

In a similar way, consideration could be given to the number of professional membership subscriptions that taxpayers might claim as a deductible expense for salary tax.

At present only one professional membership subscription may be claimed where it is a pre-requisite for the individual's employment.

R&D Initiatives

A focus on R&D is an important way to improve productivity, and the Hong Kong Government has a strong legacy for R&D support in the fields of health, innovation and technology. There are a number of schemes already designed to help Hong Kong businesses to access and use R&D, but SMEs and smaller enterprises often fail to access or benefit from R&D initiatives, yet they are the growth engines of the economy.

We hope that consideration is being given to further R&D initiatives that can better support SMEs and we would strongly support such policies.

Make Hong Kong a location of choice for people and business

Help people back to the workplace

A strong skilled workforce is the backbone of a strong economy. The Hong Kong Government could look to develop policies which could support older workers to stay in the workforce and for retired workers to re-join the workforce.

Introduce Skilled and Professional Apprenticeships

As an alternative to full funding of professional qualifications under the CEF, we would recommend that the government consider an apprenticeship model. Employers that offer apprenticeship and/or work placement programmes typically report significant benefits to their business, employee loyalty, enhanced value creation and contribution to a strong labour market. CIMA operates apprenticeship models in other jurisdictions and we would be pleased to meet with you to provide some insights into how a best in class scheme could be established for Hong Kong.

Accountancy as a STEM Subject

CIMA consider that accountancy should be recognised as a STEM subject under the categories of Technology and Mathematics. Again, we would be delighted to discuss the benefits for the future talent pipeline of similar recognition in Hong Kong, and the extent to which it might support the long-term attractiveness of Hong Kong as a location of choice for business and finance professionals.

Continuing Education Fund

The Continuing Education Fund (CEF) offers a ready framework for the Government to positively encourage people to take control of their own career development, through training and education.

For 2022-23 the subsidy ceiling was raised, and the age limit was removed. That was a strong message. More could still be done to maximise the potential benefits of the CEF. For example, to promote future finance skills it could be extended to include the full reimbursement of tuition and examination fees for taking professional examinations such as CIMA, CPA or ESG related learning which is of growing importance to the Hong Kong economy. This would in turn help ensure businesses located in Hong Kong have access to the future talents with the right skillsets they require.

Strong Public Finances

Support with Government Delivery

With public finances being more tightly controlled and having less headroom driving value for money, delivering effective and efficient government and public services have never been more important. We believe that management accountants are uniquely placed to help with this policy objective. Management accountants analyse data (both financial and non-financial) to paint a complete picture of a business and a full view of the organisational risks. They prepare, develop and analyse management information to identify the business trends and opportunities for improvement. These skills would help public services make sure they are focused and reporting against the results and objectives they wish to achieve and driving value for money for the taxpayers.

We are keen to work with you on these important issues and would like to meet with you or your team to discuss these suggestions in greater detail and how management accountants can help support public sector delivery. If you would like any more information about CIMA, or the work of the Association (together as AICPA&CIMA), or our views and thoughts about the policies and initiatives proposed above please do contact us.

Yours sincerely,

Andrew Harding
Secretary General
CIMA

Stephen Walsh
Chair
CIMA HKSAR Area Committee

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