Provisional Legislative Council

PLC Paper No. CB(1)963
(These minutes have been
seen by the Administration)

Ref : CB1/BC/3/97

Bills Committee on
Provident Fund Schemes
Legislation (Amendment) Bill 1997

Minutes of the meeting held on
Saturday, 10 January 1998, at 8:30 am
in Conference Room A of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon HO Sai-chu, JP
Hon LEE Kai-ming
Hon Mrs Peggy LAM, JP
Hon CHAN Yuen-han
Hon YEUNG Yiu-chung
Hon Ambrose LAU Hon-chuen, JP

Members absent :

Hon WONG Siu-yee
Hon James TIEN Pei-chun, JP
Hon Henry WU
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Hon CHAN Kam-lam
Hon Paul CHENG Ming-fun, JP
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen
Hon CHOY So-yuk

Public officers attending :

Mrs Pamela TAN
Mandatory Provident Fund Office

Ms Maisie CHENG
Assistant Director
Scheme Operations

Mr Raymond TAM
Assistant Director
Regulatory Standards

Mr Alfred LEE
Administrative Officer
Scheme Operations

Miss Shandy LIU
Government Counsel
Law Drafting Division
Department of Justice

Mr LUK Nai-man
Assistant Commissioner, Unit 2(2)
Inland Revenue Department

Ms Imelda CHIU Hau-lin
Technical Secretary
Inland Revneue Department

Clerk in attendance:

Miss Polly YEUNG
Clerk in attendance:Chief Assistant Secretary (1)3

Staff in attendance :

Mr LEE Yu-sung
Senior Assistant Legal Adviser

Miss Anita HO
Assistant Legal Adviser 2

Mr Daniel HUI
Senior Assistant Secretary (1)5

I. Meeting with the Administration

Consequential Amendments to the Inland Revenue Ordinance

(PLC Paper No. CB(1)725(01))

Members noted the Administration’s purposes of proposing consequential amendments to the Inland Revenue Ordinance as set out in the information paper. In this connection, the Assistant Commissioner/Inland Revenue Department confirmed that the existing tax arrangements concerning retirement benefits would be extended to the MPF accrued benefits.

2.Noting that employers’ monthly MPF contributions were tax deductible in calculating profits tax, members suggested that the Administration should review whether employees’ monthly MPF contributions should also be deductible for calculating salaries tax. In response, the Administration advised that this suggestion would affect the existing salaries tax policy and in view of its wide implications, should be studied separately in greater detail.

The Administration’s response to issues raised at the meetings on 8, 11 and 15 December 1997


(PLC Paper No. CB(1)725(02))

Proposed amendments to Mandatory Provident Fund Schemes Ordinance

Proposed section 2

3.In reply to the Chairman’s question raised at an earlier meeting, the Administration clarified that a wider definition on "spouse" had been proposed in order to avoid, as far as possible, conflicts of interest because the expression "spouse" would be used in the context of persons to be considered as associates of an approved trustee. Moreover, a similar definition was found in the Australian legislation.

Proposed section 45G

4.In response to members’ concern about the priority of payment of MPF contributions in arrears vis a vis debts owed to other creditors upon the bankruptcy or winding up of an employer, the Administration advised that the payment priority in descending order was as follows:-

  1. costs payable for the receivership or winding up;

  2. employees’ wages in arrears, wages in lieu of notice, severance payment, long service payment, unpaid MPF and ORSO contributions all ranked equally among themselves. In case the assets of the employer were insufficient to repay all these debts in full, the available assets would be apportioned equally in repayment of these debts; and

  3. statutory debts owed to the Government.

Proposed Schedule 1

5.In response to members’ request, the Administration had provided the definition of "hawker" under the Public Health and Municipal Services Ordinance.

6.Some members were concerned about the anomaly in requiring self-employed persons to make MPF contributions but excluding hawkers from MPF coverage. In response, the Director/MPF Office said that the issue had been discussed at length when the principal ordinance was passed in 1995. Hawkers had been excluded from MPF coverage mainly on grounds of enforcement difficulties. The Administration nevertheless assured members that the future MPFA would review the coverage of the MPF system in the light of experience after enactment of the MPF system.

Proposed Schedule 8

7.In response to the Chairman’s enquiry at an earlier meeting, the Administration was considering whether to retain the four categories of exclusions in proposed sections 14 to 17 of Schedule 8 in relation to the definition of associates and would revert to the Committee. Admin

Draft Mandatory Provident Fund Scheme (General) Regulation

Proposed section 37

8.To address members’ concern about the restriction on the investment manager of MPF schemes to delegate the investment management function to its subsidiary or associates only which might disadvantage local investment management companies without any overseas network, the Administration would modify the relevant provisions to the effect that an investment manager might delegate the investment management of scheme funds to another investment management company properly registered with an overseas authority. The overseas delegate, however, would be required to have a branch office or an associated company in Hong Kong which was registered with the Securities and Futures Commission. Admin

Committee stage amendments (CSAs) to the Bill - Part I

(PLC Paper No. CB(1)725(03))

Mandatory Provident Fund Schemes Ordinance

Proposed section 2

9.Upon members’ request, the Administration would move CSAs to change the expression "chief executive" to "chief executive officer" under the definitions of "chief executive", "controller" and "officer" to avoid confusion with the Chief Executive of the Hong Kong Special Administrative Region. Admin

Proposed section 6

10.As regards members’ proposal on expanding the MPFA’s function to include overseeing schemes registered or exempted under the Occupational Retirement Schemes Ordinance (ORSO), the Administration would move CSAs to proposed sections 6(2)(c) and 6A(1)(f) to enable the MPFA to exercise such other functions conferred under any other ordinance, including the ORSO, and to enter into agreement with the Government for the management and control of property or employees of the Government. Admin

11.Members noted that the Administration would move a CSA to proposed section 6D(2A) to enable the MPFA to issue guidelines requiring approved trustees to submit statistical and other returns on MPF schemes. A consequential amendment to proposed section 46(1A)(s) would also be made to achieve consistency in wording. Admin

12.As requested by members, the Administration would move a CSA on proposed section 6F to allow flexibility for the MPFA to prepare a corporate plan for more than one financial year. Admin

13.In response to members’ suggestion, the Administration would move a CSA to proposed section 6L(1) to specify the time frame for the MPFA to submit its financial statement for annual audit. Admin

14.As proposed by members, the Administration would move a CSA on proposed section 6O to the effect that the quorum for meetings of the MPF Schemes Advisory Board would not be less than half of its membership. Admin

Proposed section 12A

15.To rectify a grammatical error, the Administration would move a CSA to proposed section 12A(3)(c) to replace the word "are" with "is". Admin

Proposed section 14

16.Members noted that the Administration would move a CSA to proposed sections 14(2) to enable regulations to be made prescribing the options for scheme members in transferring their accrued benefits under different circumstances. The Administration would also propose consequential amendments to proposed section 14(3) and (4). Admin

Proposed section 18

17.In response to members’ concern, the Administration would move a CSA to proposed section 18(3) to clarify that the penalty interest would be calculated on a per annum basis.Admin

Proposed section 22B(3)

18.Members noted that the Administration would move a CSA to state clearly that all the fees to be received by the MPFA would be taken into account in fixing the level of annual registration fee. Admin

Proposed section 25

19.To avoid ambiguity, the Administration would move a CSA to substitute the word "sufficient" with "reasonable" in the proposed section so that the wordings would be closely in line with similar legislation on the duties of trustees in the administration of provident fund schemes. Admin

Proposed sections 43, 43A to 43E

20.Some members considered that the proposed level of penalty on self-employed persons under proposed section 45C, which was the same as that for employers, was too stringent because failure on the part of self-employed persons to participate in a MPF scheme and make contributions thereto had less serious consequences than such failure on the part of employers. They also pointed out that without the assistance of employers, self-employed persons had to make contributions to the trustee and to monitor their own accounts and that non-compliance on their part might be inadvertent.

21.In response, AD/SO explained that some allowance had been provided in the Ordinance exempting self-employed persons from making MPF contributions if they had incurred losses in a previous year. Moreover, the MPFA would only resort to prosecuting self-employed persons for repeated contraventions of the relevant provisions. Nevertheless, penalty provisions were necessary to achieve a deterrent effect. In this connection, the Director/MPF Office cautioned that if the level of penalty was pitched at too low a level, a loophole might result whereby employees would switch to "self-employed" status. Pursuant to members’ concerns, the Administration agreed to consider lowering the level of penalty on self-employed persons. Admin

Proposed section 45A(3)

22.Members noted that the Administration would move a CSA to delete proposed section 45A(3) in order to empower the MPFA to instigate prosecutions other than imposing financial penalties for a more serious contravention of the principal Ordinance. Admin

Proposed sections 46(3) and 47(4)

23.As requested by members, the Administration would move CSAs to retain the existing wording of sections 46(3) and 47(4) so as to be consistent with section 35 of Cap. 1 regarding the legislature’s power in approving subsidiary legislation. Admin

24.In reply to the Chairman, the Senior Assistant Legal Adviser (SALA) said that he had only some minor comments on the wordings of the proposed CSAs and he would liaise directly with the Administration. SALA

II.Any other business

Reconstitution of the MPF Schemes Authority (MPFA)

25.The Chairman said that pending the Administration’s reconsideration of the reconstitution of the MPFA, members could at this stage express their views on the issue to enable the Administration to take on board such views before finalising its proposal.

26.Members considered the constitution of various statutory bodies including the Securities and Futures Commission, Employees Retraining Board, Estate Agents Authority, Legal Aid Services Council and Hong Kong Examinations Authority as prescribed in the relevant Ordinances. They urged the Administration to consider the following proposals on the reconstitution of the MPFA: Admin

  1. the Executive Director of the MPFA would be the chief executive officer of the Authority and be accountable to a management board;

  2. the proposed management board should comprise representatives from employees, employers, the Government, the industry and other persons; and

  3. to enhance efficiency, the membership of the management board should not be too large. However, the MPFA could set up subcommittees on specialized areas of work. Moreover, the MPF Advisory Committee could have a larger membership to ensure broad representation from relevant sectors of the community.

27.In response to a member’s enquiry on the purpose of proposed section 6(3) in the principal ordinance which related to the appointment of the Executive Director of the MPFA, D/MPFO clarified that existing section 6(1) and proposed section 6(3) both provided flexibility for the Chief Executive of the HKSAR to appoint a public officer other than the Financial Secretary, or a person not being a public officer to be the MPFA or the Executive Director of the MPFA. The proposed amendments to section 6 primarily sought to re-constitute the MPFA, currently a person to be appointed by the Chief Executive of HKSAR, as a corporation independent of the Government and to impose requirements for accountability.

28.In this connection, Miss CHAN Yuen-han stated her view that the Executive Director of the MPFA should be a public officer. She considered that such a set-up would mean greater involvement of the Government in the future MPF system. Other members present at the meeting did not express any strong view on the capacity of the Executive Director being a public officer or otherwise.

29.The Chairman reminded members that the next meeting of the Committee would be held at 11:00 am on the same day.

30.The meeting ended at 10:45 am.

Provisional Legislative Council Secretariat
17 February 1998