Provisional Legislative Council
PLC Paper No. CB(2) 1489
(These minutes have been
seen by the Administration)
Ref : CB2/BC/14/97
Bills Committee on
Stamp Duty (Amendment) (No. 2) Bill 1998
Minutes of the meeting held on Friday, 13 March 1998 at 3:45 pm in the Chamber of the Legislative Council Building
Members Present :
Hon Eric LI Ka-cheung, JP (Chairman)
Hon WONG Siu-yee
Hon Henry WU
Hon Ronald ARCULLI, JP
Dr Hon Mrs TSO WONG Man-yin
Members Absent :
Hon Ambrose LAU Hon-chuen, JP
Hon NGAN Kam-chuen
Public Officers Attending :
- Mr Martin GLASS
- Deputy Secretary for the Treasury
- Mr WONG Ho-sang
- Commissioner of Inland Revenue
- Mrs Agnes SIN
- Deputy Commissioner of Inland Revenue (Technical)
- Mr Alan SIU
- Principal Assistant Secretary (Treasury)(Revenue)
- Mr CHU Yam-yuen
- Chief Assessor, Inland Revenue Department
- Ms Sherman CHAN
- Senior Assistant Law Draftsman, Department of Justice
Clerk in Attendance :
- Mrs Percy MA
- Clerk to Bills Committee
Staff in Attendance :
- Mr Arthur CHEUNG
- Assistant Legal Adviser 5
- Miss Flora TAI
- Senior Assistant Secretary (2) 3
I. Election of Chairman
Mr Eric LI was elected as the presiding Member for the election of Chairman. Mr Eric LI was nominated by Mr Ronald ARCULLI and seconded by Mr Henry WU as Chairman of the Bills Committee. Mr Eric LI accepted the nomination. As there was no other nomination, Mr Eric LI was elected as Chairman of the Bills Committee.
II. Meeting with the Administration
(PLC Brief File Ref : FIN SCR 7/2201/97, PLC Paper No. CB(2)1204 and PLC Paper No. CB(2)1222)
2. At the invitation of the Chairman, Deputy Secretary for Treasury (DS(T)) briefed members on the main proposals of Bill as set out in the Provisional Legislative Council Brief issued by the Finance Bureau (File Ref : FIN SCR 7/2201/97). He also drew members' attention to some proposed Committee stage amendments (CSAs) for the purpose of addressing a minor point in the Bill. The proposed CSAs were tabled at the meeting and subsequently issued vide PLC Paper No. CB(2)1222.
3. Members noted that the Budgetary proposals of the Bill sought to -
- replace the current stamp duty remission for transactions in regionalderivative options and convertible bonds or notes with a specific exemption, so as to simplify the process for granting the concession; and
- extend this exemption to cover transactions in regional derivative warrants which had no more than 40 per cent weighting by value in Hong Kong stock.
|4. Responding to Mr Henry WU regarding consultation on the Bill, the Commissioner informed members that the Administration had only consulted the industry associations, including the Stock Exchange of Hong Kong and the Hong Kong Securities Clearing Company Limited (HKSCC Ltd.). Pointing out that derivative trading might have exacerbated the financial turmoil that occurred last year and pending the release of a report on the review on the subject by the Finance Services Bureau, Mr WU expressed reservation about whether it was opportune to implement the proposals and whether there was adequate monitoring and regulation of derivative trading. He stressed that it was important to consult the parties concerned on the Bill. Mr WONG Siu-yee held a similar view. Members agreed that representatives of the Financial Services Bureau would be invited to answer members' questions on the review at the next meeting. Members also agreed that the parties concerned should be consulted on the Bill. In this regard, the Chairman and Mr WU undertook to approach the Hong Kong Society of Accountants and the securities industry respectively.
Hon Henry WU
5. Members noted that the non-Budgetary proposals in the Bill sought to -
- makes specific provisions to allow for postponement in payment of stamp duty in appropriate circumstances pending an appeal to court on the stamp duty assessment;
- plug potential loophole in respect of duty evasion; and
- make technical changes to improve the operation of the Stamp Duty Ordinance (Cap. 117) (the Ordinance).
Members also noted that the Administration had at the request of the Secretariat, provided an information note on the non-Budgetary proposals which had been issued vide PLC Paper No. CB(2)1204.
6. In view of the tight time schedule, members expressed reservation about the need to include the non-Budgetary proposals in the Bill because there was no urgency for them to be implemented. DS(T) responded that they were included the Bill for the purpose of administrative efficiency. He stressed that these proposals were technical in nature.
7. In response to Mr Ronald ARCULLI's question as to why a potential loophole in respect of duty evasion was anticipated, the Commissioner explained that with the establishment of the Central Clearing and Settlement System (CCASS), most Hong Kong stocks were placed in the central depository and were registered in the name of a common nominee. A transfer of stocks or interest in stocks was no longer necessary to be effectuated by executing an instrument of transfer because of the computerization and thus payment of stamp duty could be avoided.
8. The Commissioner also informed members that HKSCC Ltd. was planning to establish an automated and mechanized stock borrowing and lending system with similar clearing facilities as that of the CCASS for the sale and purchase of stocks. One of the non-Budgetary proposals was to expand the scope of the defined meaning of "stock borrowing", "stock borrowing and lending agreement" and "stock return" in order to allow stock borrowing and lending transactions under the proposed system to benefit from the stamp duty relief.
9. Referring to the fact that the Financial Services Bureau was commissioning a review on derivatives, Mr WONG Siu-yee queried why the Administration sought to expand stock borrowing and lending at the present stage. Principal Assistant Secretary (Treasury) (Revenue) (PAS(T)(R)) clarified that stock borrowing and lending transactions were already relieved from the charge of stamp duty liability under the Ordinance. The Administration only sought to amend the Ordinance to the effect that transactions under the proposed system would be construed as a stock borrowing and lending agreement within the statutory meaning between the borrower and lender. In this connection, DS(T) confirmed that the Financial Services Bureau was aware of these non-Budgetary proposals which had no policy implication.
III. Legislative timetable
10. Members noted that if the Bill was to resume Second Reading debate at the last Council meeting (which would commence on 7 April 1998), the deadline for giving notice of Committee stage amendments would be 27 March 1998.
IV. Date of next meeting
11. Members agreed that the next meeting would be held on Monday, 23 March 1998 at 8:30 am to continue discussion on the Bill.
12. There being no other business, the meeting ended at 4:40 pm.
Provisional Legislative Council Secretariat
24 April 1998