^ Back

10th Legco Report to HKSA Council By Eric K.C. Li

I. Highlights

The Budget, NPC and NPCC elections as well as campaign activities related to our own May 24 election of the first HKSAR Legislature had been keeping reporters very busy.

The 'honeymoon' period seems to have come to an end for Mr. C.H. Tung's Administration: the public has indeed become very critical of the Government's handling of housing, education,and health issues; questions have also been raised regarding our Government's determination to safeguard free speech in Hong Kong.

Mr. Tung has, for his part, been keeping very busy at home, in China and abroad. Predictions concerning the Chief Executive's intentions to move rapidly and position his own officials and advisors were proven wrong.

During a press conference called to announce his retirement, the Foreign Secretary, Mr. Qian Qichen, announced that major initiatives would be taken this year to improve Sino- British relations. The NPC is also taking definite steps towards a market economy and this is generally taken as good news for Hong Kong.

The Budget brought good news to Hong Kong and was generally well received by the accountancy profession. This time round, I gave the Financial Secretary some much needed support in my response speech. A copy of my speech will be sent to all members before the end of this month.

Thanks to the concerted efforts of the HKSA Council, the registration of voters in the Accountancy Functional Constituency was a remarkable success; our registration rate reached 81.2% with 9,902 voters registering. I understand that the Council is also determined to work very hard at ensuring a similar successful voter turnout on election day.

II. Committees and Panels

1. Public Accounts Committee (PAC):
@ The PAC met a total of 19 times before I tabled the PAC Report No. 29 Legco on 11 February 1998. The Report recommends, amongst other measures, wider disclosure of Government Accounts. It received extensive support and press coverage.
2. Financial Affairs Panel:
@ The Panel held 5 meetings (Agenda attached as Appendix I). Two particular topics may warrant Councils attention:-
@ (i) Interest on Tax Revenue Certificates (TRCS): I raised the point that the interest rates on TRCS were quite low (2-6%) compared to commercial rates, especially as they apply to large sum held over long periods of time. It also transpired during discussions that, in over 50% of disputed cases, there was really no need to compel taxpayer to buy TCRs. The matter was reported to the Taxation Committee of HKSA on 21 January 1998 and it will be taken up further with the Commissioner of Inland Revenue (CIR) in regular meetings to be held between CIR and HKSA.
@ (ii) SFC Budget: I pressed the SFC to explain the need for an apparent sudden increase in enforcement personnel; my questions prompted SFC to reveal that it was really targeting Finance Companies regulations as they relate to the activities of stockbrokers. SFC finally agreed to work closely with HKSA and avoid duplication in regulating professional accountants.
@ The Administration is also making a push for the long term debt market by issuing fixed interest mortgage loans.
3. Welfare Services Panel:
@ The Panel held 3 meetings; the Social Welfare Services Development Fund was discussed on 13 March 1998. On 1 April 1998, at the request of the Hong Kong Council of Social Service, I sponsored a motion debate and urged the Government to ensure, through adequate funding in coming years, that planned social welfare services would not be disrupted especially if the expected period of economic downturn materialized.
4. Education Panel:
@ The Panel held 2 meetings. No item of significant interest to HKSA was discussed.
5. Finance Committee and House Committee:
@ 3 meetings of the Finance Committee and 7 meetings of the House Committee were held. I insisted on a proper procedure for considering the $6.4 billion paid the Hong Kong Telecom (HKT): I suggested scrutinising the Bill further before approving payment and hearing representations from interested parties. Although the Finance Committee did, in the end, vote the funds through, pressures asserted in the questioning process forced both the Government and HKT to publicly make important pledges regarding future openness in discussing telecommunication issues.

III. Bill Committees Joined
1. Provident Fund Schemes Legislation (Amendment)Bill 1997:
@ Although I did not formally join the Bills Committee, I did follow the progress of the Bill very closely when it was suggested by HKSA that problems could be caused by many of the proposed changes to the Bill.
@ Through intense lobbying, I succeed, with the support of the Bills Committee Chairman, in reopening with the MPF office some of the more problematic issues. After two weeks of work and close liaison between HKSA and the MPF office, numerous amendments were hammered out and agreed on by the two sides. By the time the Bill was passed on 25 February 1998, HKSA was basically satisfied with the final product and with provisions regarding accounts, auditing and voluntary liquidation. Further detail rules on Court Wind up procedures may still need to be worked out.
@ The controversial MPF Bill was finally passed with a tiny margin and with the full support of independent PLC members.
2. Stamp Duty (Amendment) 1998 Bill:
@ On 13 February 1998, I was elected Chairman of this Bill which is part of the Budgetary recommendations. HKSA submissions are awaited on certain non-Budgetary issues i.e. anti-avoidance measures on electronic share transactions etc.
3. Inland Revenue (Amendment) 1998 Bill:
@ On 16 March 1998, I voiced some initial observations about the open ended nature of the Bill; the Bill includes four clauses giving the Commissioner of Inland Revenue wide discretion regarding the deduction for Home Mortgage Loan Interests.
4. Agreement on Relief of Double Taxation with China:
@ On 16 March 1998, I was elected Chairman of the working group which will examine the Agreement on relief of double taxation with China. I have already made several observations to resolve possible differences between HKSAR and China Tax Authorities on the interpretation of permanent establishment, controls, split service contracts, existing 50% profit taxation as well as other issues.
@ Although the Working Group has already agreed, since no amendment is possible, to proceed with the endorsement of the Memorandum of Understanding as it presently stands, it will hold a further meeting on the 24th of March to hear HKSA as well as other submissions. It will then convey these submissions to the Administration and request specific promises of follow-up.

IV. Motion Debates

List attached as Appendix II - The Highlights of speeches will be published in my circular to members.

V. General Political Background

With election preparations in full swing, the Government is likely to benefit from some temporary breathing space. It cannot afford however to be caught off guard; the smallest mistake could be blown up by political parties and candidates who will, during the coming weeks, be craving for publicity to help their own election campaigns.


^ Back