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Hong Kong snubbed on FTA and tax deals

Hong Kong snubbed on FTA and tax deals

THE Australian government has refused requests from Hong Kong to start negotiating a free trade agreement and a double taxation agreement. The refusal has angered Australian companies hoping to boost their business with and through Hong Kong, the primary gateway to China.

During a visit to Australia in 2011, Donald Tsang, who stepped down last year as Hong Kong’s chief executive, approached Julia Gillard and then-foreign minister Kevin Rudd about an FTA and a DTA. Following a visit by Mr Rudd to Hong Kong and further talks, the Hong Kong government wrote formally to Canberra proposing talks towards an FTA.

Hong Kong was told in reply that its proposal was “an ambitious one” and “we would need to be convinced about the benefits” of considering talks.

After further representations, Hong Kong was told that Australia did not wish to pursue the offer.

The Australian Chamber of Commerce in Hong Kong, which has 1400 individual and 500 corporate members representing 750 companies, has made two direct representations for a DTA to Treasurer Wayne Swan, most recently this January, and two to the Treasury — without any result.

Cameron Boardman, the head of Invest Hong Kong for Australia and New Zealand, said a DTA would be “a significant catalyst for cross-border investment both ways”. Investment between Hong Kong and Australia is already 1.67 times greater than that between China and Australia. Much of China’s international investment derives from the Hong Kong-listed arms of its largest corporations. Mr Boardman said New Zealand, which has both an FTA and DTA with Hong Kong, ” is now starting to reap the benefits, in capital and fund management flows, from its DTA. But in Canberra, there appears to be no enthusiasm for this or for an FTA, or a willingness to begin anything on a formal basis.

“Hong Kong is keen to get on with both deals, since there’s a mutual benefit, and it’s hard to see why Australia isn’t interested.”

Opposition foreign affairs spokeswoman Julie Bishop said she was aware Hong Kong had approached Canberra about its proposals and that the government “is not interested”. She said: “There’s already a great deal of business between Australia and Hong Kong, which is a window in and out of China. In that context, it’s very important.” She said many benefits could result from such agreements.

The Australian chamber in Hong Kong told Mr Swan the lack of a DTA diminishes Australia’s reputation as a regional financial services hub, limits Australia’s potential as a secondary renminbi destination in Asia, and discourages Asian investors from investing in Australian funds.

Hong Kong has signed DTAs with 25 countries including Britain, France, Malaysia, Indonesia, Switzerland and, recently, Canada, and is negotiating with 10 other nations. Australia already has 44 DTAs, including with Singapore and China.

Darren Bowdern, chairman of the Australian chamber’s finance committee and a KPMG tax partner in Hong Kong, said there would be little impact on Australian revenues except for royalty withholding tax, which involved very few companies and was an area Hong Kong may be willing to carve out of the deal

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