(Source : Government Information Centre)
LCQ18: Stamp duty on stock transactions
Following is a question by the Hon Eric Li and a written reply by the Secretary for the Treasury, Miss Denise Yue, in the Legislative Council today (April 25):
Regarding the effect of the projected level of average daily turnover and the actual turnover in respect of stock transactions on the budgets of the Administration and the Securities and Futures Commission ("SFC"), will the Government inform this Council:
(a) of the projected level of average daily turnover for the year 2001-02 when it worked out the income from stamp duty on stock transactions for that year, and the basis on which the projection was made;
(b) of the basis on which SFC worked out the average daily turnover of stock for the year 2001-02 as around $11 billion when it prepared its budget for that year;
(c) of the income in stamp duty on stock transactions for the year 2001-02 with reference to SFC's projected level of stock turnover; and
(d) whether the Government and the SFC will make public revised estimates of the relevant revenues from time to time in the light of the actual daily turnover of stock in the coming few months, so as to avoid sending confusing messages to the market; if not, of the reasons for that?
(a) The Government's estimate of the revenue from stamp duty on stock transactions for 2001-02 was based on the actual daily average of stamp duty received from stock transactions between April and December 2000, plus a projected modest growth for budgeting purpose and a reduction of 11% to take into account the effect of our proposal to reduce the duty rate in the Budget. This, in effect, is equivalent to assuming an average daily turnover of around $11 billion in the stock market for 2001-02.
(b) When preparing its budget for 2001-02 in February 2001, the SFC projected that the average daily turnover of stock transactions for 2001-02 would be around $11 billion. This projection was made primarily in the light of the average daily turnover for the ten months from April 2000 to January 2001, which stood at $11.3 billion.
(c) As the projected daily turnover of the stock market for 2001-02 underlying both the SFC budget and the Government's original estimate for stamp duty on stock transactions for 2001-02 is similar, the income from stamp duty on stock transactions with reference to SFC's projected level of stock turnover would be the same as that projected by the Government based on the Government's projected level of stock turnover.
(d) The Government's established practice is to announce revised estimates for all its recurrent revenue items in the current financial year, including stamp duty on stock transactions, on the day when we announce the Budget for the subsequent financial year. This is done for the purpose of the Government's annual budget exercise. The revised estimates on revenue from stamp duty on stock transactions are not intended to be an official forecast of the stock market performance. We do not see the need to revise our estimates on revenue from stamp duty on stock transactions and to announce such revised estimates from time to time during the course of a financial year.
The SFC's projection of turnover on stock transactions is made for the sole purpose of estimating its annual income from transaction levy. It is not intended to provide any indication of market trends on stock transaction levels for reference by the market. It is therefore SFC's standing practice to provide the revised estimates of its income and expenditure for the current financial year to reflect the updated situation only in the context of drawing up its budget for the following financial year. SFC has no plan to deviate from its existing practice.
End/Wednesday, April 25, 2001