Hong Kong plans to increase share stamp rights

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Original caption: Hong Kong intends to increase stamp duty on stocks

Securities Times reporter Wu Shaolong

On the afternoon of February 24, Hong Kong Finance Secretary Chen Maobo announced the 2020-2021 budget at the Hong Kong Legislative Council. At the meeting, Chen Maobo said that after fully considering the impact on the stock market and international competitiveness, he decided to introduce a bill to adjust the stamp duty rate on Hong Kong shares, the current buyer and the current buyer. seller each paying 0.1% of the transaction. amount to 0.13%. Additionally, the U.S. Securities and Exchange Commission announced that as of February 25 local time, the U.S. Stock Exchange transaction fees will be reduced from 0.00221% to 0.00051. % and only sales orders will be charged.

Affected by the news of the stamp duty increase in Hong Kong, the Hang Seng index fell during the session with high volume, at the close the Hang Seng index fell 2.99% to 29,718.24 points. Obviously, A shares were also affected. The Shanghai Composite Index fell after the Hang Seng Index and continued to weaken in the afternoon. The largest intraday drop was close to 3% at one point, and the late drop narrowed, down 1.99%. for the whole day.

Relevant experts said that the market is very concerned about the increase in the stamp duty rate of Hong Kong shares. Since the Hong Kong administrative authority announced it during the day, all parties felt very sudden. In contrast to the practice of international financial markets, it is rare to announce such severe policy during the session. Based on the behavior of the Hong Kong stock market on that day, this is a typical “black swan” event. Shares A are obviously affected as well. It remains to be seen whether the subsequent impact on the flow of funds from Shanghai and Shenzhen-Hong Kong Stock Connect.

Balancing Hong Kong government revenue is a major reason for the increase in the stock stamp tax rate. Chen Maobo predicts that Hong Kong’s gross domestic product (GDP) will grow between 3.5% and 5.5% in 2021; The headline inflation rate in 2021 is expected to be 1.6% and the base inflation rate to be 1%. Regarding fiscal spending, due to the introduction of countercyclical fiscal measures and the continuous increase in current spending, the fiscal deficit is expected to reach HK $ 101.6 billion, equivalent to 3.6% of GDP. Chen Maobo said: “Hong Kong will run deficits year after year after 15 years of surplus.”

A few days ago, the Hong Kong industry also discussed raising the share stamp duty rate. On February 3 this year, Hong Kong Treasury and Financial Services Secretary Xu Zhengyu said in response to Chung Guobin’s inquiry that he would continue to review the stamp duty on equity transactions under factors such as balancing the government revenue, promote the development of the market and maintain the competitiveness of the Hong Kong stock market.

Xu Zhengyu explained that Hong Kong is a small and completely open economy with a simple and low tax system. Government revenues are easily affected by changes in the macroeconomy. Among them, revenue from stamp duty is particularly affected by asset prices, market conditions and falling transaction volume. But at the same time, the stamp duty on share transactions is also an important source of revenue for the Hong Kong government.

Statistics show that in fiscal year 2019-2020, the stamp tax represents about 10% of government revenue, and about half comes from the stamp tax on stock transactions. In 2020, the average daily turnover of the Hong Kong stock market reached HK $ 129 billion, an increase of more than 48% from 2019. Therefore, stamp duty income from transactions of Stocks will continue to be a major source of revenue for the government.

Prior to this, the stamp duty rate on Hong Kong shares has been continuously reduced. According to the Hong Kong Internal Revenue Department, the tax rate was 0.15% from April 1, 1993 to March 31, 1998; from April 1, 1998 to April 6, 2000, the tax rate was reduced to 0.125%; April 7, 2000 As of August 31, 2001, the tax rate was reduced to 0.1125%. On September 1, 2001, the tax rate dropped back to 0.1% and is still in use today.

It should be noted that after the Hong Kong stock stamp duty rate adjustment should wait for the relevant legislative procedures to be completed, the measures will come into effect on the date specified in the amending regulations.

Chen Maobo said that the development of the Hong Kong stock market has gone through two stages, namely interconnection and reform of the listing system. However, while sparing no effort to promote the development of the international financial market, it is also necessary to consider The issue of competitiveness The increase in the stock stamp tax this time is only lower, we will closely follow the development of the stock market and its impact on future tax revenues and the stock market. Regarding industry input, the Legislative Council will hear input later when the Stamp Tax Ordinance is revised.

The relevant person in charge of the Hong Kong Stock Exchange responded at the 2020 performance press conference held on the same day that the market needs time to digest the news, but it is recommended that the market not react too much or too fast, and it should take more time to observe. In addition to cost, the attractiveness of the Hong Kong market has many other factors to consider, such as the quality of listed companies, factors that can increase the vitality of the Hong Kong capital market.

Also, based on the previous announcement by the US Securities and Exchange Commission, effective February 25 local time, the transaction fee of the US Stock Exchange will be reduced from 0.00221% to 0.00051 %, and only sell orders will be charged, a decrease of 76.92%. According to the data, the aforementioned fees are charged by securities firms, including processing fees and securities management expenses, the processing fees are paid to the exchange, and the securities management fee is paid to the SEC (charged by the exchange). The SEC explained that the decrease in the tax year 2021 rate is mainly due to the sharp increase in rates in recent months. This trend began in March 2020 when the new corona epidemic occurred, during which US stocks reached a record trading volume in the market. it has completed most of its estimated targets for fiscal year 2021 ahead of schedule.

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