PLC Paper No. LS 117
Paper for the House Committee Meeting
of the Provisional Legislative Council
on 6 March 1998
Legal Service Division Report on
Stamp Duty (Amendment) (No. 2) Bill 1998
Objects of the Bill
The objects of the Bill are -
- to give effect to the Budget proposals on exemption for transactions in regional derivative options and convertible bonds or notes and regional derivative warrants; and
- to streamline the operation of certain aspects of the stamp duty scheme.
PLC Brief Reference
2. PLC Brief FIN SCR 7/2201/97 issued by the Finance Bureau and dated 26 February 1998, in particular paragraphs 11 and 12.
Date of First Reading
3. 4 March 1998.
Comments
4. The primary purpose of the Bill is to give effect to the proposals set out in paragraph 125 of the 1998-99 Budget Speech, i.e. -
- to replace the current stamp duty remission for transactions in regional derivatives options and convertible bonds or notes with a specific exemption, so as to simplify the process for granting the concession; and
- to extend this exemption to cover transactions in regional derivative warrants which have no more than 40% weighting by value in Hong Kong stock.
5. Under the principal ordinance, the transactions described in paragraph 4(a) and (b) above are not expressly exempt from stamp duty. However, according to the Administration, they are exempted in practice through the use of a general power given to the Chief Executive to remit or refund any stamp duty.
6. The Bill also makes other amendments in respect of the operation of certain aspects of the stamp duty scheme. These include -
- providing for the postponement of stamp duty payment pending an appeal;
- specifying that a transfer of beneficial interest in Hong Kong stock otherwise than by way of sale and purchase shall be chargeable with stamp duty as if it were a sale and purchase; and
- redefining some expressions relating to stock borrowing and lending to cater for an automated and mechanised clearing system.
These amendments are not mentioned in the Budget Speech. It is explained in paragraph 12 of the PLC Brief that one of the purposes of these amendments is to "plug potential loophole in respect of duty evasion". However, no background information has been provided.
Conclusion
7. The Bill consists of mostly technical amendments to give effect to budget proposals and to bring about improvements to the operation of the stamp duty scheme. Members may wish to consider setting up a Bills Committee to examine the practical implications of the non-budgetary proposals.
Prepared by
CHEUNG Ping-kam, Arthur
Assistant Legal Adviser
Provisional Legislative Council Secretariat
4 March 1998
