Hong Kong should look at implementing a digital services tax on foreign service providers which could bring in as much as HK$1.5 billion in revenue, the Hong Kong General Chamber of Commerce says.
The recommendation comes ahead of the new budget for the 2024-25 fiscal year that will be revealed this month.
The HKGGC says the tax could be applied to online advertising, social media platforms, e-marketplaces, content streaming and sharing and data intermediary services, at a 3 to 5 percent rate.
HKGCC said local providers should be exempt from the tax to provide a fair competitive environment for traditional businesses and local digital service suppliers.
The chamber cited data from a third party which showed that digital service suppliers earned revenue worth US$3.5 billion (HK$27.3 billion) in Hong Kong last year and if they are taxed at a rate of 5 percent, it would generate tax revenues of HK$1.4 billion.
Digital service providers are less likely to pass on taxes to consumers, based on the experience in other regions, HKGCC added.
Apart from the introduction of the new tax, the HKGCC proposed allowing residents to use funds in their Mandatory Provident Fund schemes to buy their first home or pay for long-term care services and health insurance.
It also called to the abolition of all property stamp duties.
CPA Australia yesterday said it estimates Hong Kong's fiscal deficit will reach HK$127 billion for the financial year ending March, more than double of the government's estimate of HK$54.4 billion.
Both the HKGCC and CPA have proposed a series of tax incentives, including rebates on salaries tax and extension of a SME loan scheme.
The chamber suggested a one-off tax rebate for profits tax and salaries tax, subject to a ceiling of HK$6,000, while the CPA has a higher ceiling of HK$10,000 for the rebate.
Both institutions expect the government to extend the application period of the SME financing guarantee loan scheme for another 12 months.
The accountants also suggested a carbon tax to be launched in 2026. For example, the initial tax rate could be set at HK$100 per tonne of carbon dioxide equivalent or tCO2e for companies emitting over 25,000 tCO2e.
Meanwhile, the Financial Services Development Council has proposed seven measures, including removing the ceiling on income eligible for tax deduction for charitable donations in a bid to establish Hong Kong as a regional philanthropic hub.
HKGCC deputy chairwoman Agnes Chan and taxation committee chairman Wayne Lau reveal the proposals for the upcoming budget.
