No corporate tax cut for long-suffering Hong Kong firms

There will be no corporate tax cut in the first-half of this year and probably in the second half, as well.

Chief Executive Donald Tsang said rising economic risks make it difficult to realize his 2007 promise to further cut corporate taxes before his term expires on June 30.

“It’s hard to meet my vow to cut corporate tax,” Tsang said. “After the global financial crisis, we may see the emergence of a worldwide recession. So it’s hard to have room to do such a thing right now.”

Reducing the tax could restore Hong Kong’s edge against regional rivals such as Singapore, which narrowed the corporate tax rate gap with Hong Kong to 50 basis points in 2010 from 10 percentage points in 1999 to attract global businesses.

Raymond So, dean of the business school at Hang Seng Management College in Hong Kong, said Tsang's reluctance is understandable since the levy is a hedge against the impending risk of an economic downturn.

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