MR CHAN CHUN-YING (in Cantonese):
Deputy President, in 2016 Hong Kong made an undertaking to the Organisation for Economic Co-operation and Development (“OECD”) to counter base erosion and profit sharing activities, so after extensive consultation, the Government hopes to implement through the Inland Revenue (Amendment) (No. 6) Bill 2017 (“the Bill”) the four minimum standards, namely countering harmful tax practices, preventing treaty abuse, imposing country-by-country reporting requirements and improving the cross-border dispute resolution mechanism.
The Bill is exceptionally complex, containing three parts, nine divisions and 36 clauses. The Chinese version or the English version of it each contains 162 pages, involving many new requirements. Therefore, the Bills Committee, of which I was a member, convened nine meetings in total to discuss them one by one in detail. First of all, I wish to thank the Chairman of the Bills Committee, Mr Kenneth LEUNG, for guiding us in conducting thorough discussions on the relevant clauses. I would also like to take this opportunity to sing praises of the Administration, including the Financial Services and the Treasury Bureau and the Inland Revenue Department (“IRD”). As regards the views of Members, they immediately conducted careful studies and consideration and then proposed a number of enhancement measures. Therefore, I will support the Bill and all of the amendments proposed by the Government.
Deputy President, in fact, despite a lengthy exercise of the so-called preliminary consultation, in the public hearing held by the Bills Committee, 24 deputations presented various views on the Bill. The views of these deputations merit high regard and consideration by the Government. Among them, I am most concerned about whether it is possible to allow a longer time for tax residents of Hong Kong in respect of the submission of country-by-country reports and other instruments to IRD. Moreover, some stakeholders, particularly those from the financial services sectors, are concerned about the corresponding changes to their business operations and financial reporting systems following the implementation of the Authorized OECD Approach. For this reason, they would like to have a longer lead time to prepare for the changes and more guidance from IRD to facilitate their formal compliance with the so-called Authorized OECD Approach.
The Administration eventually agreed to move a series of amendments to the transitional provisions, having considered the views of the Bills Committee and the deputations to further relieve the compliance burden on the business sector, to extend the preparation period for master and local files from six months to nine months after the end of the accounting period of the enterprises concerned so as to tally with the tax return filing deadline. The Administration was also willing to listen to the views of the trade and Members to raise the thresholds on total revenue and total assets for enterprises not required to prepare a master file and a local file, expressly provide for the fee of the advance pricing arrangement, etc.
As regards the exemption based on size of business, I am aware that the Government has proposed many amendments. The final amendment proposed by the Government relaxes the exemption so that enterprises which satisfy any two of the following three conditions will not be required to prepare a master file and a local file. These three conditions are: the total amount of revenue is not more than HK$400 million; the total value of assets is not more than HK$300 million; and the average number of employees is not more than 100. I consider that such conditions, after repeated discussions and revisions are relatively reasonable and can meet the requirements of the international organization while granting appropriate exemption to smaller enterprises in keeping with the policy intent.
Deputy President, the Government has proposed fairly numerous amendments to the Bill. In a positive light, it shows that the Government readily heeds good advice and is willing to accept views and make reasonable adjustments. Yet on the contrary, it can be seen as an inadequacy in preliminary consideration or consultation. Nevertheless, I completely understand that there is no simple answer to striking a balance among the interests of all parties and I can only say that, in dealing with complex Bills which introduce brand new concepts as such in the future, the Government should conduct more in-depth and extensive studies and allow reasonable and lenient deadlines. If the deadlines are reasonable and lenient, on the one hand, the Legislative Council will have ample time for discussion and, on the other, relevant stakeholders will also have enough time to familiarize themselves and comply with the requirements. These are all necessary. I hope all Policy Bureaux can draw on the experience of the scrutiny of the Bill. I tender this remark for mutual encouragement.
I so submit. Thank you, Deputy President.