LEGISLATIVE COUNCIL ― 22 June 2017 10405 OFFICIAL RECORD OF PROCEEDINGS Thursday, 22 June 2017 The Council continued to meet at Nine o'clock MEMBERS PRESENT: THE PRESIDENT THE HONOURABLE ANDREW LEUNG KWAN-YUEN, G.B.S., J.P. THE HONOURABLE LEUNG YIU-CHUNG THE HONOURABLE ABRAHAM SHEK LAI-HIM, G.B.S., J.P. THE HONOURABLE TOMMY CHEUNG YU-YAN, G.B.S., J.P. PROF THE HONOURABLE JOSEPH LEE KOK-LONG, S.B.S., J.P. THE HONOURABLE JEFFREY LAM KIN-FUNG, G.B.S., J.P. THE HONOURABLE WONG TING-KWONG, S.B.S., J.P. THE HONOURABLE STARRY LEE WAI-KING, S.B.S., J.P. THE HONOURABLE CHAN HAK-KAN, B.B.S., J.P. THE HONOURABLE CHAN KIN-POR, B.B.S., J.P. DR THE HONOURABLE PRISCILLA LEUNG MEI-FUN, S.B.S., J.P. THE HONOURABLE WONG KWOK-KIN, S.B.S., J.P. THE HONOURABLE MRS REGINA IP LAU SUK-YEE, G.B.S., J.P. 10406 LEGISLATIVE COUNCIL ― 22 June 2017 THE HONOURABLE PAUL TSE WAI-CHUN, J.P. THE HONOURABLE LEUNG KWOK-HUNG# THE HONOURABLE CLAUDIA MO THE HONOURABLE STEVEN HO CHUN-YIN, B.B.S. THE HONOURABLE FRANKIE YICK CHI-MING, J.P. THE HONOURABLE WU CHI-WAI, M.H. THE HONOURABLE YIU SI-WING, B.B.S. THE HONOURABLE MA FUNG-KWOK, S.B.S., J.P. THE HONOURABLE CHARLES PETER MOK, J.P. THE HONOURABLE CHAN CHI-CHUEN THE HONOURABLE CHAN HAN-PAN, J.P. THE HONOURABLE LEUNG CHE-CHEUNG, B.B.S., M.H., J.P. THE HONOURABLE KENNETH LEUNG THE HONOURABLE ALICE MAK MEI-KUEN, B.B.S., J.P. DR THE HONOURABLE KWOK KA-KI THE HONOURABLE KWOK WAI-KEUNG THE HONOURABLE CHRISTOPHER CHEUNG WAH-FUNG, S.B.S., J.P. # According to the Judgment of the Court of First Instance of the High Court on 14 July 2017, LEUNG Kwok-hung, Nathan LAW Kwun-chung, YIU Chung-yim and LAU Siu-lai have been disqualified from assuming the office of a member of the Legislative Council, and have vacated the same since 12 October 2016, and are not entitled to act as a member of the Legislative Council. LEGISLATIVE COUNCIL ― 22 June 2017 10407 DR THE HONOURABLE HELENA WONG PIK-WAN THE HONOURABLE IP KIN-YUEN DR THE HONOURABLE ELIZABETH QUAT, J.P. THE HONOURABLE MARTIN LIAO CHEUNG-KONG, S.B.S., J.P. THE HONOURABLE POON SIU-PING, B.B.S., M.H. DR THE HONOURABLE CHIANG LAI-WAN, J.P. IR DR THE HONOURABLE LO WAI-KWOK, S.B.S., M.H., J.P. THE HONOURABLE CHUNG KWOK-PAN THE HONOURABLE ALVIN YEUNG THE HONOURABLE ANDREW WAN SIU-KIN THE HONOURABLE CHU HOI-DICK THE HONOURABLE JIMMY NG WING-KA, J.P. DR THE HONOURABLE JUNIUS HO KWAN-YIU, J.P. THE HONOURABLE LAM CHEUK-TING THE HONOURABLE HOLDEN CHOW HO-DING THE HONOURABLE SHIU KA-FAI THE HONOURABLE WILSON OR CHONG-SHING, M.H. THE HONOURABLE YUNG HOI-YAN DR THE HONOURABLE PIERRE CHAN THE HONOURABLE CHAN CHUN-YING 10408 LEGISLATIVE COUNCIL ― 22 June 2017 THE HONOURABLE TANYA CHAN THE HONOURABLE CHEUNG KWOK-KWAN, J.P. THE HONOURABLE LAU KWOK-FAN, M.H. DR THE HONOURABLE CHENG CHUNG-TAI THE HONOURABLE KWONG CHUN-YU THE HONOURABLE JEREMY TAM MAN-HO THE HONOURABLE NATHAN LAW KWUN-CHUNG# DR THE HONOURABLE YIU CHUNG-YIM# DR THE HONOURABLE LAU SIU-LAI# MEMBERS ABSENT: THE HONOURABLE JAMES TO KUN-SUN THE HONOURABLE MICHAEL TIEN PUK-SUN, B.B.S., J.P. THE HONOURABLE DENNIS KWOK WING-HANG DR THE HONOURABLE FERNANDO CHEUNG CHIU-HUNG THE HONOURABLE HO KAI-MING THE HONOURABLE SHIU KA-CHUN THE HONOURABLE HUI CHI-FUNG # According to the Judgment of the Court of First Instance of the High Court on 14 July 2017, LEUNG Kwok-hung, Nathan LAW Kwun-chung, YIU Chung-yim and LAU Siu-lai have been disqualified from assuming the office of a member of the Legislative Council, and have vacated the same since 12 October 2016, and are not entitled to act as a member of the Legislative Council. LEGISLATIVE COUNCIL ― 22 June 2017 10409 THE HONOURABLE LUK CHUNG-HUNG THE HONOURABLE KENNETH LAU IP-KEUNG, M.H., J.P. PUBLIC OFFICERS ATTENDING: PROF THE HONOURABLE ANTHONY CHEUNG BING-LEUNG, G.B.S., J.P. SECRETARY FOR TRANSPORT AND HOUSING MR JAMES HENRY LAU JR., J.P. UNDER SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY CLERKS IN ATTENDANCE: MISS FLORA TAI YIN-PING, ASSISTANT SECRETARY GENERAL MS DORA WAI, ASSISTANT SECRETARY GENERAL 10410 LEGISLATIVE COUNCIL ― 22 June 2017 GOVERNMENT BILLS Committee Stage CHAIRMAN (in Cantonese): Good morning. Committee will continue with the second debate. Mr LEUNG Yiu-chung, please speak. INLAND REVENUE (AMENDMENT) (NO. 2) BILL 2017 MR LEUNG YIU-CHUNG (in Cantonese): Chairman, I notice that when Dr KWOK Ka-ki spoke in this debate session yesterday, he pointed out that there was a good intention behind the new policy. It is certainly so, and I also wish that the current tax reform can provide the SAR Government with a good prospect. This is the common wish of the people of Hong Kong, but I am worried that this is only our wishful thinking. As we all know, other countries are also promoting the development of the industry, and Hong Kong is not the only place making these changes. If a competitive environment is created for the development of the industry, a lot of people will be attracted to participate. I have generally talked about yesterday the development of the industry in Mainland China, and from which we can see that not just in Hong Kong, any industry which is financially profitable under the capitalist system and free market mechanism will naturally attract competitors. Hence, should the Government be so optimistic about this? For example, as pointed out by Mr LEUNG Kwok-hung yesterday, things might not go as smoothly as we think. With regard to the profits derived, Mr LEUNG Kwok-hung indicated yesterday that only $2.6 billion of profits have been recorded in Ireland, and should these be regarded as huge profits? It should not be very difficult to engage in other businesses and reap such profits in Hong Kong. However, in order to develop aircraft leasing business, we have to make a breakthrough in tax reform and the attempt cannot be regarded as a simple one. I will talk about this breakthrough later, and let me first respond to … CHAIRMAN (in Cantonese): Mr LEUNG Yiu-chung, we are now discussing the clauses involved in the current debate. You should speak on the amendments proposed to the relevant clauses instead of the overall policy. Discussions on LEGISLATIVE COUNCIL ― 22 June 2017 10411 the Government's policy have already been completed during deliberation of the Bills Committee and the Second Reading debate. Please speak on the relevant clauses. MR LEUNG YIU-CHUNG (in Cantonese): I will come to the discussion very soon. CHAIRMAN (in Cantonese): We are now discussing clauses 4, 8 and 10. MR LEUNG YIU-CHUNG (in Cantonese): I know, I will get to the point very soon, and those are just opening remarks. Let me first respond to a point made by Mr James TO yesterday in the current debate session. With regard to the amendments proposed to clauses 4, 8 and 10, he opined that the biggest problem lied in the fact that the Government had only indicated its wish to move the amendments at the final meeting of the Bills Committee, and this was indeed most undesirable. According to him, the amendments were proposed in response to the comments made by the Organisation for Economic Co-operation and Development ("OECD") about the issue on ring-fencing and onshore leasing activities. Mr James TO said that such a practice was most undesirable. Nevertheless, can we take the matter more seriously and say that it is in fact a dereliction of duty on the part of the government officials concerned? OECD is an international organization with an important status in this respect, but the Government had known nothing about its stance, and it was not until shortly before the final meeting of the Bills Committee that the Government eventually realized what had gone wrong and proposed the amendments hastily. Is this a mistake or a dereliction of duty? In this connection, the Government has never given us a proper explanation, and I think this is where the problem lies. Apart from this, the Government has explained that the main objective of the amendments is simply to add a new tax assessment option so that the new tax regime will be extended to cover onshore aircraft leasing activities. Under the proposed amendments, all local airline companies will be provided with an additional tax assessment option so that they may compare the pros and cons of 10412 LEGISLATIVE COUNCIL ― 22 June 2017 the current and new tax regimes in accordance with their own business consideration and strategy, and then elect for assessment under the new tax regime or remain under the current tax regime. Chairman, this is the point which I would like to raise just now. Relatively speaking, this is indeed a breakthrough and a new policy, which is completely different from the standardized tax assessment option we are now adopting. The first difference is that profit-makers are allowed to choose freely between the two options and elect for assessment under the regime most favourable to them, and this is already one great breakthrough. Under the existing standardized assessment option, corporations are required to submit their financial reports to the Inland Revenue Department to declare the amount of profits they have gained, and the profits tax they have to pay will then be calculated at the standard tax rate.