Tuesday, March 16, 2010
Hong Kong’s Financial Secretary, John C Tsang, made the traditional post-budget speech at the Joint Business Community Luncheon on March 12 and, in particular, reviewed the tax measures taken to increase the transaction cost of property speculation so as to reduce the risk of a property bubble being created.
In the budget, the government proposed that from April 1, stamp duty on properties valued at over HKD20m (USD2.6m) will be raised from 3.75% to 4.25%, and buyers will no longer be allowed to defer payment of stamp duty on such transactions. The government will also closely monitor the trading of properties valued at or below HKD20m. If there is excessive speculation in the trading of these properties, the government will consider extending the measures to these transactions.
He reminded his audience and taxpayers that “the Inland Revenue Department has established procedures to track property transactions involving speculation. If these transactions were found to constitute a business, we will levy profits tax, the current rate is 16.5%, on those concerned for profits arising from such transactions.”
While the government will also work to ensure transparency in property transactions and strengthen market regulations, the government will also “prevent the excessive expansion of mortgage lending and ensure banks process mortgage loan applications prudently. We will introduce further measures when it is necessary to strengthen further the prudent regulation of our banks.”
He emphasized that the “basket of measures is not introduced to be a quick-fix, and it does not come with a promise of overnight results.” The measures should, he added, “send a clear and strong message to the market, and to the public of our intentions to curb property speculation and dampen price fluctuations.”
He confirmed that the government would continue to monitor market developments closely, and that, in his opinion, the budget contained appropriate measures to promote long-term stability of the property market. However, he concluded that, “if need be, we will implement additional measures to cool speculation.”