HONG KONG: The Australian accounting entity, CPA Australia, Hong Kong Division, has unveiled a list of tax proposals for strengthening the city's economic performance, including a call for a 3 percent tax reduction to stimulate small and medium enterprises (SMEs).

The tax reduction for SMEs would reduce the city's tax income by HK$0.8 billion but it would help companies to maintain competitiveness, said CPA Australia's taxation committee in a series of proposals in advance of Financial Secretary John Tsang's 2010-11 budget.

"There are 270,000 SMEs, employing 40 percent of the locals," said Sarah Linda McGrath, deputy chairperson of the committee. "In order to help strengthen their competitive position to grow, to have the ability to reinvest in technology, to invent new jobs, also to ride out any difficult economical times ahead, the best way is to reduce the profit tax rate by 3 percent," she said.

CPA Australia says many of the new companies were set up by people who were laid off during the economic recession of last year and the proposed tax relief measure would serve to create new job opportunities. The measure also would help SMEs deal with high overhead and operating costs.

Chan Shan-ho, chairman of Hong Kong Small and Medium Enterprises General Association, called the proposal an excellent idea. At the same time, he urged the government to provide more funding to help companies, especially in the area of employee training.

"Last year the government launched some loan schemes and funding to help SMEs. Some of the funding has reached the application deadline. I hope the government can re-evaluate the funding programs and strengthen the assistance given to the SMEs," said Chan.

Chan thinks the economy has not yet recovered fully and the SMEs need still more remedies to promote themselves and discover more markets. He said local SMEs play an important role in the local economy and in creating employment positions. Ninety percent of companies are SMEs, he noted.

Chan also urged the government to provide more training to local employees of SMEs to enhance their adaptability and thus to improve their competitiveness, especially for those who want to dig into the growing mainland market.

"How can they do business on the mainland if they don't know how to speak mandarin?" Chan said. "Many of them are also not familiar with the policies there too. The government should put some effort in the relative training given to employees."

(HK Edition 02/10/2010 page1)