PRESS RELEASE

(Source : Government Information Centre)

Revenue (Abolition of Estate Duty) Bill 2005 to be gazetted on Friday

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The Revenue (Abolition of Estate Duty) Bill 2005, which seeks to implement the proposal to abolish estate duty announced in the 2005-06 Budget, will be gazetted this Friday (May 6).

To promote the further development of our asset management business, the Government consulted interested parties and the public at large last year on the abolition of estate duty. The majority view tends to support abolition.

"In recent years, global financial services have experienced phenomenal growth. The financial markets in the Asia-Pacific region have also quickened the pace of their development. Hong Kong is looking at unprecedented opportunities in this sector, but at the same time faces increasing competition. A number of countries in the region, including India, Malaysia, New Zealand and Australia, have abolished estate duty over the past 20 years. Hong Kong must not lose out in this race," a Government spokesman said.

"The abolition will encourage people, including overseas investors, to hold assets in Hong Kong through a Hong Kong corporate vehicle or trust. Those who currently avoid the tax through overseas investments will also be encouraged to transfer their investments back to Hong Kong," the spokesman added.

"The further development of the high value-added asset-management industry will foster growth in a number of professional services, and other industries will also benefit, bringing significant economic benefits to the community as a whole.

"Apart from attracting or retaining capital to promote the development of Hong Kong's financial services industry, the proposed abolition of estate duty will also reduce the time taken for obtaining the grant of probate or letters of administration, thereby helping to ease cash-flow problems heirs to an estate currently face, particularly for operators of small and medium enterprises," the spokesman added.

It is estimated that the proposal to abolish estate duty will cost the Government annual tax revenues of around $1.5 billion. However, the abolition of estate duty is expected to encourage investments in both financial assets and the property market in Hong Kong, thereby contributing additional revenue from stamp duty and other taxes.

Under the proposal in the Bill, estates of persons who pass away after the commencement of the Revenue (Abolition of Estate Duty) Ordinance 2005 will not be subject to estate duty.

The Bill will be introduced into the Legislative Council on May 11, 2005.

Ends/Wednesday, May 4, 2005

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