Other Revenue Items
Profits Tax
78. A good number of local chambers of commerce and professional bodies have suggested revisions to the current profits tax arrangements for corporate losses. Of these proposals, the most significant ones are for the introduction of group loss relief and loss carry-back arrangements.
79. We have studied these two proposals in some detail. With the development of today's financial tools, group loss relief can easily be abused as a means to evade tax, and such activities would be very difficult to combat. I estimate that the suggested exemption, if implemented, would cost billions of dollars a year in lost tax. While taxpayers who suffer losses in their businesses may be helped to a certain extent to tide over difficult times by loss carry-back arrangements, this would place enormous pressure on tax revenue during periods of economic downturn. The Government would not only suffer a loss in tax revenue, but also have to refund tax collected in preceding years. Compared with other places, Hong Kong's tax rate is already very low. Businesses are already allowed to offset their losses indefinitely against the profits of future years. Our tax regime remains very attractive to investors. I do not therefore propose to introduce any group loss relief or loss carry-back arrangements.
