Briefing by the Administration
Mr CHAN Chun-ying enquired about the timeframe for Hong Kong to take forward the Multilateral Instrument and the consequences if Hong Kong did not meet the international standard in this regard. He also sought details regarding the implementation strategy for Article 6 of the Multilateral Instrument which contained both mandatory and optional provisions.
DS(Tsy) advised that the order to be made by CE-in-C under section 49 of IRO would be subject to the negative vetting procedure of LegCo, and hence the scrutiny of the subsidiary legislation would be completed within four weeks (or seven weeks if the scrutiny period was extended) immediately following the day on which the subsidiary legislation was tabled at LegCo. As regards the implementation strategy, DS(Tsy) said that the Government intended to take forward the mandatory provisions only while opting out of the optional articles, except for an optional provision under Article 6. The optional provision under Article 6 allowed participating jurisdictions to include in their CDTAs preamble language relating to a desire to further develop an economic relationship and enhance cooperation in tax matters. As this preamble was in line with the objectives of Hong Kong’s CDTA policy and demonstrated the goodwill of Hong Kong towards international tax co-operation, it was advisable for Hong Kong to take forward this optional provision under Article 6.
Mr CHAN Chun-ying noted that the Inland Revenue (Amendment) (No. 6) Bill 2017 (“the Amendment Bill”) which sought to amend IRO for implementing the BEPS package in Hong Kong was under scrutiny by a Bills Committee. He enquired whether there would be relationship between the timeframe for implementing the Multilateral Instrument and the passage of the Amendment Bill.
DS(Tsy) explained that the Amendment Bill sought to codify the transfer pricing principles into IRO and implement the minimum standards of the BEPS package; whereas the Multilateral Instrument would allow Hong Kong to modify the application of the relevant existing CDTAs so as to ensure that they would be BEPS-compliant. The two legislative exercises were not sequential in nature.
Expenditure of the Insurance Authority
Mr CHAN Chun-ying referred to paragraph 8(e) of the information paper (i.e. LC Paper No. CB(1)625/17-18(04)), and enquired whether the increase in expenditure for the item “Non-recurrent projects” was to cater for the cashflow requirement (rather than the cost) of the consultancy studies on the development of the RBC regime. He further asked if the consultancy studies were expected to complete within 2018-2019, and suggested that details on IA’s expenditure and cashflow requirement should be presented separately. Mr CHAN also sought details of the mechanism for handling expenditure items with the original estimates exceeded, including whether covering approval from relevant parties of IA would be required.
Deputy Secretary for Financial Services and the Treasury (Financial Services)2 (“DS(FS)2”) confirmed that the expenditure concerned was to meet the cost of the consultancy studies relating to RBC project which would straddle over several financial years. On the handling of cost-overrun items, C/IA advised that the revised estimate of IA would first be examined by the Corporate Services Committee of IA, and then approved by IA Board.
Retention of two supernumerary directorate posts and creation of a supernumerary directorate post in the Financial Services and the Treasury Bureau
Mr CHAN Chun-ying expressed support for the Administration’s proposal. Pointing out that the DS(FS)3 and PAS(FS)6 supernumerary posts had been retained a number of times since 2006 and many tasks taken up by the two posts were ongoing in nature, he asked whether the Administration had considered turning the two posts permanent. Mr CHAN considered that a duration of three years might not be enough for PAS(FS)(MPF Reform) to complete tasks relating to the development of eMPF and enhancement of the MPF system. He asked if the Administration would consider extending the duration of the post to, say, five years. Mr CHAN further remarked that the job descriptions for the posts should be as specific as possible.
DS(FS)3 responded that the Government had carefully reviewed the need of turning the two supernumerary posts permanent. She emphasised that the Government had to be prudent in putting forward proposals involving the directorate establishment, and thus proposed to extend the DS(FS)3 and PAS(FS)6 supernumerary posts for two and three years respectively, as well as to create the PAS(FS)(MPF Reform) supernumerary post for three years. If the proposal was approved, the Government would review the continued need of the three posts before their expiry having regard to the progress of various tasks taken up by the post holders. She also took note of Mr CHAN’s views relating to the job descriptions.
Construction of the Joint-user Government Office Building in Cheung Sha Wan
Mr CHAN Chun-ying expressed support for the project and enquired about the plot ratio of the proposed Treasury Building. He suggested that when the Administration submitted the proposal to PWSC and FC, it should provide information on the construction floor area and estimated cost per square meter of the proposed Treasury Building, as well as comparison of the estimated cost with those of comparable projects. Given that the relocation of WCGOC involved 28 bureaux/departments and the Judiciary with a total staff headcount of over 10 000, as well as construction of nine replacement government buildings, Mr CHAN enquired about the total staff headcount to be relocated to the proposed Treasury Building, and the impact on the relocation exercise of WCGOC if there was delay on the construction of the project.
DS(Tsy)3 and Project Director 1, Architectural Services Department (“PD1/ArchSD”) said that the site of the proposed Treasury Building was under the approved South West Kowloon Outline Zoning Plan. The overall level of commercial development in the planning area, including the project site, was constrained by the capacity of the transport network and a plot ratio of 8 was therefore imposed to restrict traffic growth. As regards the construction cost, PD1/ArchSD advised that the construction cost per square meter of the proposed Treasury Building was similar to that of other Government office buildings including the Trade and Industry Tower and the Inland Revenue Tower in the Kai Tak Development Area. DS(Tsy)3 added that about 2 000 staff would be accommodated at the proposed Treasury Building. As the programme of the proposed Treasury Building was ahead of most of the other replacement building projects, it was not on the critical path of the WCGOC relocation exercise.