Shares in Hong Kong fell sharply in the Asian session on Wednesday. Hong Kong plans to raise the stamp duty on share transactions to 0.13 per cent, financial secretary Paul Chan announced. The news triggered a plunge in Hong Kong stocks, with the Hong Kong stock exchange dropping more than 12 percent at one point.
The Financial Secretary of the HKSAR Government, Paul Chan, said that after fully considering the impact on the international competitiveness of the securities market, we have decided to introduce a bill to increase the stamp duty rate on shares from 0.1 per cent to 0.13 per cent. The Government will continue to fully implement various measures to develop the securities market and bring Hong Kong’s financial sector to a higher level.
Mr Chan said he expected a deficit of $101.6 billion, or 3.6 per cent of GDP, in the next fiscal year, due to the introduction of counter-cyclical fiscal measures and the continued rise in recurrent expenditure, despite the improvement in revenue. In other words, after 15 years of surpluses, Hong Kong will run successive deficits.
Hong Kong’s Hang Seng index extended intraday losses to 1,000 points on news that the territory plans to raise stamp duty on share trading. The Hang Seng Technology Index extended losses to 6 percent. At one point, the Hong Kong stock exchange plunged more than 12 percent, its biggest drop since 2015.
A-shares have also been dragged down. The Shenzhen index extended afternoon losses to 3 per cent, while the Shanghai index fell 2.6 per cent. The ChiNext index fell below 3,000 for the first time since January 4, extending losses on the day to 3.6 percent.
Meanwhile, FTSE China A50 index futures extended losses to 3 per cent.
Indeed, around 11am on Wednesday, news that Hong Kong was about to raise the stamp duty on share trading began to rout the market, triggering a fall in share prices.
At around 11 am on Wednesday, the Hong Kong Economic Times reported that market rumors in the upcoming budget would raise the stamp duty on shares from the current 0.1 per cent to 0.13 per cent for buyers and sellers. Shares in the Hong Kong Stock Exchange quickly plunged, falling nearly 9 per cent at one point to HK $506. However, the Hong Kong Economic Times quickly retracted the story, and the exchange’s share price recovered.
To this, the personage within the course of study once discussed in succession, many people think is an own dragon. Volatility increased again after Mr Chan’s confirmation.
In fact, on February 3, Hong Kong legislators raised questions about the issue. At present, both parties to Hong Kong-listed securities are required to pay a stamp duty of 0.1% of the value of the transaction, Mr Chung Kwok-peng said.
Some people thought that raising the tax rate would help alleviate the serious fiscal deficit. However, some people thought that it would weaken the international competitiveness of Hong Kong’s stock market, as Japan, Singapore and the United States did not levy such a tax.
According to the Hong Kong economic journal, is currently the buyer and the seller shall be respectively amount is 0.1% of the shares to pay every transaction stamp tax (less than 1 yuan for 1 yuan), buy a hand tencent, for example, assume that tencent’s share price is 700 yuan, in 100 the value of 70000 yuan, the buyers and sellers need to pay the stamp tax is 70 yuan, tax buyers and sellers need to pay 91 yuan, which increased 21 yuan.
According to the latest report by RTHK website on February 24, a spokesman for Hong Kong Exchanges and Clearing (HKEx) responded that it was disappointed with the government’s decision to increase the stamp duty on share trading, but understood that the tax was an important source of government revenue. The HKEx will work closely with all stakeholders to continue to drive the continued success, resilience, competitiveness and attractiveness of Hong Kong’s capital markets.
According to the data of Hong Kong Inland Revenue Department, since 1993, the stamp duty rate of Hong Kong shares has shown a continuous downward trend: on April 1, 1993, solstice, and on March 31, 1998, the tax rate was 0.15%; 1 April 1998 solstice On 6 April 2000, the rate was reduced to 0.125%; 7 April 2000 solstice On 31 August 2001, the rate was reduced to 0.1125%. Since September 1, 2001, the tax rate has been lowered again, to 0.1%, and is still in place today.
According to data provided by Hui Ching-yu, Hong Kong’s Secretary for Financial Services and the Treasury, the Hong Kong government has actually collected more than HK $33 billion from stamp duty on share transactions in each of the last five financial years except 2016-17