Hong Kong Exchanges and Clearing Limited (HKEx) has submitted a response to the Government's consultation paper on estate duty and its views on exempting securities dealings from profits tax.

HKEx's views on the subjects are summarised below.

Estate duty

HKEx supports the abolition of estate duty, as this would be beneficial to the stock market and to the economy of Hong Kong. Any tax on assets situated in Hong Kong is likely to be a deterrent to the holding of Hong Kong assets. Taxes on assets also detract from Hong Kong's role as a centre for capital formation and a financial services centre. It is particularly important to abolish estate duty in view of Hong Kong's prominent and growing role as a financial services centre for Mainland China where there is no estate duty.

HKEx is of the view that estate duty, like taxes on capital gains and dividends, is a form of double taxation and inconsistent with Hong Kong's general and long-standing avoidance of double taxation.

Exemption of securities dealings from profits tax

HKEx supports the Government's initiative to exempt offshore funds from profits tax and recommends expanding the exemption to all dealings in Hong Kong-listed securities, regardless of the nature, residency or domicile of the investor. While obtaining a clear and early exemption from profits tax for dealings in Hong Kong-listed securities by offshore funds is important, it would be the second-best solution. HKEx recommends that all income - capital gains, dividends, interest, etc - on all investment in securities listed in Hong Kong should be clearly and specifically exempted from profits tax.

One of Hong Kong's great competitive advantages is the ease of doing business, including a simple tax regime. This advantage should be maintained and strengthened whenever possible.

"We have submitted recommendations based on our commitment to further strengthening Hong Kong's position as an international financial centre," said HKEx Chairman Charles Lee.

The full texts of the submissions are available on the HKEx website via the following link: http://www.hkex.com.hk/eng/newsconsul/submissions/index.htm.