One of the report main suggestions is to create new tax exemption schemes and incentives to encourage international offshore marine insurers to work from HK.
"With our excellent port infrastructure, strategic location, sound legal system, and quality maritime services, Hong Kong has been an international port since 1970's," said Agnes Choi, Chairman of the HKFI. "To maintain this leading edge, and in face of keen competition from other markets, we hope to find ways to strengthen Hong Kong's role as an IMC."
According to the report, Hong Kong went from previously being ranked as the world busiest port to the third today, trailing Shanghai and Singapore. "Hong Kong's Government needs to create a business environment conducive to maritime services. The advantages of Hong Kong's simple low tax regime are quickly being eclipsed by the tax incentives offered by competing IMCs."
In order to encourage the placement of local insurance in the special administrative region, the insurance industry is hoping the government will begin a round of advanced negotiations with Mainland China.
The aim of these discussions would be to designate HK as a Tier 2 reinsurance region and introduce double tax deduction to promote a shift in sales terms of shippers and exporters from FOB to CIF, which would lead to an increase in locally underwritten insurance.
The report also expresses the need for HK to grow its network of Double Taxation Agreements (DTAs), especially with its top 20 trading partners, noting that it has such agreements in place with only about half of them.
Hong Kong recently signed its 29th DTA with Qatar, while Singapore and Mainland China have each secured more than 50 DTAs so far. That puts HK at a direct disadvantage and HKFI stresses the importance of expanding HK tax agreements in improving economic and trade relations with other countries and encouraging international companies to set up regional head offices in Hong Kong.
Singapore currently provides a host of tax incentives and financial support structures to the marine industry, such as 10-year tax exemptions on qualified shipping income and 5-year tax concessions for ship or container leasing companies. Many of those plans were recently readjusted and extended for longer periods.
Singapore also supports captive insurers, specialized insurers and marine hull and liability insurers with similar schemes. The report suggests that HK should follow suit if it wants to strengthen its status as a major IMC and design methods to bridge the gap in advantages between itself and other neighboring jurisdictions.
The HKFI commissioned the Center for Transport, Trade and Financial Studies of the City University of Hong Kong and the One Country Two Systems Research Institute to conduct this study in August 2011.
It compiled its suggestions following months of research and interviews with numerous industry stakeholders and practitioners in fields ranging from insurance and logistics to shipping and tourism as well as some relevant government officials.
Among the proposed plans, the report advises the government to continue its quest to join the ASEAN-China Free Trade Area agreement and speed up ratification of dual tax agreements (DTA) with ASEAN countries and other major trading partners. It also suggests building a top-notch logistics park with connection to the cargo source in the Pearl River delta region to promote intermodal transportation and cargo flow within the city, especially for high-value, branded and high-end products.
Attracting and retaining talents through training programs and preferential immigration policies should also be on HK government agenda as advised by HKFI.
