To present orally.
II. Committees and Panels
||Public Accounts Committee (PAC):
I was elected Chairman of the PAC for another four
years in its first meeting on the 20th October
On 15 November 2000, the Director of Audit tabled his
Report No. 35 in the Legislative Council. The Report No.
35 contains 12 chapters. The Committee, after holding
three days of public hearings to receive evidence from
the Controlling Officers, are now meeting in closed door
to deliberate on our own independent conclusions. I intend
to present the PAC Report to LegCo on 7 February 2001.
||Financial Affairs Panel:
The Panel held 4 meetings to date and the relevant agenda
are attached as Appendix I.
On 10 November 2000, the Panel received a briefing from
the Financial Services Bureau on the Securities and Futures
Bill, Banking (Amendment) Bill as well as Process Review
Panel the Chairman of the Securities and Futures Commission
(SFC). The Administration began the bill's drafting process
eight years ago. The amendments include shifting the burden
of proof from the defendants to the SFC and reducing maximum
penalties for 10 criminal offences.
The Financial Secretary (FS) also briefed the Panel on
Hong Kong's latest economic situation on 4 December
2000. He claimed that the deficit for the current financial
year is likely to reach $11 billion while the jobless
rate will take two years to fall to a "normal"
A proposed list of future agenda items is attached as
Appendix II for reference.
||Economic Services Panel:
The Panel held 5 meetings to date. The Panel focused
on the progress update on Hong Kong Disneyland, retail
prices of major fuels and competition in the markets,
Hong Kong Electric Co. Ltd's proposed tariff revision,
Hong Kong Tourist Association (Amendment) Bill and the
Report on the work of the Competition Policy Advisory
There were two special meeting, one was a closed session
to discuss the retail prices of major fuels and competition
in the markets, the other was to receive a briefing by
the experts from the United Kingdom Civil Aviation Authority
who are currently engaging in a review of the air traffic
control system in Hong Kong from 4 December to 8 December
||Information Technology and Broadcasting
The Panel held 4 meetings to date. The Panel discussed
the licensing of third generation mobile services, the
Cyberport, digital broadcasting, the administration of
Internet domain names in Hong Kong as well as Public Opinion
Survey on Film Classification 2000.
Two special meetings were held to study the Draft Generic
Codes of Practice for Television and Draft Radio Codes
of Practice, the Draft Competition Investigation Procedures
and Draft Guidelines to the Application of the Competition
Provisions of the Broadcasting Ordinance. It also studied
the implementation of carrier licence under Telecommunication
(Amendment) Ordinance 2000, licence fees for TV programme
service licensees, Entertainment Special Effect Regulation
(draft) and code of practice and block vote funding for
computerisation for 2001-02.
These discussions reflect that the Administration is
liberating the information technology market in full speed.
The Panel held 4 meetings to date. The Panel mainly focused
on the reform proposals for the education system in Hong
Kong, the Education (Amendment) Bill, Composite Furniture
and Equipment Grant, the modification to Direct Subsidy
Scheme, and one-off matching grant of $50 million to the
Open University of Hong Kong for the Information Technology
There was a special meeting to listen to the views of
school sponsoring bodies and parent-teacher associations
on school-based management.
||Environmental Affairs Panel
There were 7 meetings of Environmental Affairs Panel
(including 3 special meetings to examine the Administration's
proposal to increase the approved project estimate of
320DS "Strategic Sewage Disposal Scheme State I:
completion of sewer tunnel system from Kwai Chung to Stonecutters
Island and to receive a briefing from the International
Review Panel (IRP) on its report of the Strategic Sewage
Disposal Scheme as well as a Joint meeting with Panel
on Transport to discuss the control of vehicle emissions)
It also studied the management of construction and demolition
materials and water quality at Shing Mun River, the protection
of wetlands in Hong Kong, the proposed amendment to Waste
Disposal (Refuse Transfer Station) Regulation and vapour
recovery of dry cleaning machines.
||Finance Committee and House Committee:
There were 3 meetings of Finance Committee and 10 meetings
of House Committee.
TD of HKSA were kept informed of progress on all Bills
on a weekly basis. The introduction of Government Bills
in the current legislative session dated 27 October 2000
is attached as Appendix III. I held two separate stocktaking
meetings with the Secretariat on 17 October 2000 and 13
November to closely monitor progress of all HKSA submissions.
I plan to hold such meetings regularly in future.
III. Bill Committees Joined
||Inland Revenue (Amendment)
I was elected Chairman of this Bills Committee. There
were 3 meetings held since the last report. The Bill seeks
to amend the Inland Revenue Ordinance (Cap. 112) ("the
||provide that all sums payable
for the use of intellectual property (whether in or outside
Hong Kong) by a person carrying on a trade, profession or
business in Hong Kong and deductible in ascertaining the
assessable profits of that person are deemed to be receipts
arising in or derived from Hong Kong from a trade, profession
or business carried on in Hong Kong;
||amend the conditions which must
be satisfied for deduction of interest payable by a person
upon money borrowed by him for the purpose of producing
||revise the method of computation
of annual allowances and the determination of balancing
allowances and charges in respect of commercial and industrial
buildings and structures;
||amend the definition of "expenses
of self-education" to include fees paid in respect
of certain specified examinations;
||allow deduction of interest paid
on the portion of a home loan in respect of a car parking
space if such loan has been applied for the acquisition
of the car parking space;
||empower the Board of Review to
extend the time for lodging notice of appeal against the
assessment to additional tax;
||provide for certain costs and
fees to be specified in a Schedule to the Ordinance and
empower the Secretary for the Treasury to vary the amounts
by order; and
||make technical amendments.
||HKSA made a detailed submission
to the Bill as well as appearing in front of the Bills Committee
on the 4 December 2000. HKSA submits that the Bill casts
a net that is far too wide, which could have significant
adverse implications for the commercial debt market of Hong
Kong, particularly in respect of the amendment to Section
15 and 16.
Considering the proposed new Section 15(1)(ba) (certain
amounts deemed trading receipts), HKSA suggests that it
seems to be inconsistent with the fundamental principle
of "source" in the Hong Kong tax regime since
it may make the recipient of royalty taxable in situations
in which that person is charging the royalty for activities
conducted exclusively outside of Hong Kong.
With regard to the proposed Clause 6 (ascertainment of
chargeable profits) Section 16, HKSA considers that Section
16(2)(f)(iii)(A) will be beyond an issuer's control to
prevent an associate acquiring debentures. Besides, such
amendment seems unfair and against the spirit of s16(2)(f)
to deny a deduction for any interest paid to unrelated
parties simply because some portion of the debentures
are held by associates.
Under the proposed s16(2)(d)(ii), the Bill seeks to extend
the conditions that attach to borrowings secured or guaranteed
by deposits to arrangements involving loans. It is not
apparent, however, in what sense the money borrowed in
the situations described above could be said to be secured
by a loan.
HKSA also considers s16(2)(e). HKSA would like to obtain
clarification as to the justification for expanding the
section in a way which has seemingly not been deemed to
be necessary for the previous 16 years of its existence.
Under Clause 14 (Hearing and disposal of appeals to the
Board of Review) Section 68(9), HKSA would like to make
the point that the potential costs should not be set at
such a level as to discourage good faith applications
to the Board.
The Bill has received numerous other submissions along
the same line and I have temporarily suspended further
meetings of this Bills Committee until the Administration
has an opportunity to rethink and to consult relevant
bodies on their proposals.
||Rehabilitation Centres Bill
The Committee met twice since the last report. The objective
of the Bill is to provide for the appointment of rehabilitation
centres for the detention and rehabilitation of offenders
of or over 14 and under 21 years of age and for related
The Bill does signify a new step in tackling juvenile
||Drug Trafficking and Organized
Crimes (Amendment) Bill 2000
There was only 1 meeting held since the last report.
The main objects of the Bill are to:
||make parallel amendments to the
Drug Trafficking (Recovery of Proceeds) Ordinance (Cap.
405) ("the DT(RoP)O") and the Organized and Serious
Crimes Ordinance (Cap. 455) ("the OSCO") to -
||empower the Court of First Instance, in the case of a
person who has been arrested for a drug trafficking offence
or a specified offence under the OSCO, and released on bail,
to issue a restraint or charging order against the person's
property, if the Court is satisfied that there is reasonable
cause to believe that the person may be charged with the
offence after further investigation is carried out (sections
2 and 7 of Schedule 1 and sections 2 and 6 of Schedule 2);
||empower the Court of First Instance or the District Court,
in the case where a person, who is subject to proceedings
for a drug trafficking offence or a specified offence under
the OSCO, has absconded and reasonable steps have been taken
to ascertain his whereabouts but of no avail, to issue a
confiscation order against him (section 3(a) of Schedules
1 and 2)
||empower the Court of First Instance or the District Court
to fix a period within which a person has to pay under a
confiscation order (section 6 of Schedule 1 and section
5 of Schedule 2);
||require a person to give information in determining the
value of realisable property the subject of a restraint
or charging order and make it an offence for a person to
knowingly deal in any realisable property in contravention
of such an order (sections 8 and 9 of Schedule 1 and sections
7 and 8 of Schedule 2 and section 3(b)(ii) and (iii) of
||create a new offence of dealing in realisable property
having reasonable grounds to suspect that the property in
whole or in part represents a person's proceeds of drug
trafficking or an indictable offence (sections 10(a), (b)
and (d), 11(b) and 13 of Schedule 1 and sections 9(a), (b)
and (d), 10(b) and 11 of Schedule 2); and
||increase the penalty for certain offences;
||amend the DT(RoP)O to repeal
section 4(4) so that certain statutory assumptions for the
purposes of determining whether a person has benefited from
drug trafficking and the value of the benefit will also
apply to a person convicted of drug money laundering offence
(section 4 of Schedule 1); and
||make consequential amendments
to the DT(RoP)O and the Drug Trafficking (Recovery of Proceeds)
(Designated Countries and Territories) Order (Cap. 405 sub.
leg.) (section 12 of Schedule 1 and sections 1 and 2 of
||HKSA made a written submission
to the Bill. There were two main issues (section 25 and
section 25A of the two Ordinances) that HKSA had serious
First of all, altering the standard of proof required
for a conviction under sections 25 and 25A will mean that
the subjective mental state of the accused will play little
part in establishing that person's guilt. This could mean
that persons who would not have committed any offence
under the law as it now stands because they harbour no
suspicious about a certain set of circumstances, may well
be liable to be convicted in future. This is especially
the case in relation to section 25A which currently relies
exclusively on a subjective test.
Besides, because of the very broad scope of the Organised
and Serious Crimes Ordinance and the failure of the Bill
to distinguish the more serious from the less serious
offences, unlike e.g. the equivalent legislation in England,
the amended Ordinance is likely to become a trap for the
innocent and unwary. The implications for accountants
and other professionals are likely to be even greater
because the courts may have a lower threshold of tolerance
for any ignorance on their part.
We are awaiting the Government's Committee Stage Amendments
||Bills Committee on Dutiable
Commodities (Amendment) Bill 2000
||There was only 1 meeting held.
The objective of the Bill is to amend the Dutiable Commodities
Ordinance (Cap. 109) (the Ordinance) to provide for the
presumption of dutiability of light diesel oil based on
its sulphur contents.
The Administration wish to resume second reading of the
Bill on 20 December 2000, and introduce a Committee Stage
Amendment to specify 1 February 2001 as the commencement
date of the Bill.
||Bills Committee on Securities
and Futures Bill and Banking (Amendment) Bill 2000
||There was only 1 meeting held.
The Securities and Futures Bill establishes the twin themes,
namely, consolidation and amendment. The Bill consolidates
10 existing Ordinance, including the Securities and Futures
Commission Ordinance (Cap. 24); (b) the Commodities a Trading
Ordinance (Cap. 250); (c) the Securities Ordinance (Cap.
333). In addition, the Bill seeks to update the regulatory
regime for the securities and futures market, bringing it
up to international standards where necessary, simplifying
and rationalizing procedures where possible and enhancing
the system of checks and balances.
The objectives of the Banking Ordinance (Cap. 155) ("BO")
are to: (a) to add to the function of the Monetary Authority
("MA") the regulation of business conducted
by authorized institutions ("AI") which is not
banking business or the business of taking of deposits;
(b) to impose a duty on MA to keep a register of persons
employed by and acting for exempt AI in their regulated
activities; (c) empower the MA to publicly or privately
reprimand exempt AI; (d) to enable MA to regulate the
financial year end of AI; (e) to require an auditor to
report to MA any matter that adversely affects to a material
extent the financial position of an AI; (f) to provide
for matters relating to the approval by MA, and the appointment
by AI, of executive officers; and (g) to empower MA to
disclose information relating to exempt AI and their regulated
A submission from HKSA is still awaited. I have urged
the HKSA to suggest a policy wide procedure to deal with
access to working papers and records from third parties
like accountant to provide consistency and fair dealing
of all the regulators and departments concerned. Otherwise,
our legislation may be littered with many different versions
of similar legislation which will cause problem in future.
V. Motion Debate
List attached as Appendix IV. Speeches on my Web Page and highlights
will be published in my circulars to members.
I have asked 3 questions (1 question on the government's effort
to assist professionals in exploring development opportunities outside
Hong Kong, 1 question on the determination of HOS flat sale prices,
1 question with regard to a proposal to bid holding the next All
China Games in Hong Kong) since the last report which are attached
as Appendix V. The relevant HKSA Committees may wish to be advised
and to consider the replies further.
VII. General Political Background
To present orally.