Loss of US bilateral shipping tax accord no big deal say HK port interests
HONG KONG remains an attractive place for the shipping industry to prosper, according to the city's Transport and Housing Bureau, despite the US decision to end its 1989 bilateral shipping tax agreement
HONG KONG remains an attractive place for the shipping industry to prosper, according to the city's Transport and Housing Bureau, despite the US decision to end its 1989 bilateral shipping tax agreement.
Hong Kong will be able to support the sustainable development of the maritime industry, said the Transport and Housing Bureau in an email reply to the city's South China Morning Post.
The Hong Kong government has criticised the American decision as a 'lose-lose' proposition for both parties.
'With the strong institutional advantages of a competitive tax system that is simple with low tax rates, a business-friendly environment, a level-playing field, and a host of high-quality maritime services on offer, Hong Kong will remain an attractive place to do business,' the bureau said.
While officials and analysts have downplayed the issue as a 'limited impact' event, the city can do without the irritant. Hong Kong has slipped down the pecking order among the world's busiest ports over the years .
The US suspended the reciprocal tax exemption agreement with Hong Kong on shipping last week, which allows companies to avoid double taxation on shipping income.
The move formed part of the US decision last month to end the city's trade privileges under the Hong Kong Policy Act of 1992, after Beijing imposed the controversial national security law on Hong Kong on June 30.
The US also sanctioned several top city and mainland officials, including Chief Executive Carrie Lam for suppressing Hong Kong freedoms.
'If the agreement is cancelled, it will increase operating costs of shipping companies,' said Maggie Wang, a transport analyst in Hong Kong at Bocom International Securities.
'The four per cent tax rate that will be charged by the US for Hong Kong ships is not very high, so the impact is limited on shipping companies and Hong Kong in itself.'
Cosco Shipping International, a unit of the world's third largest carrier, said the impact is minor in a call on its interim results in 2020.
'The impact of trade frictions and the suspension of Hong Kong taxation agreement in fact created relatively big shocks to the shipping industry in the early stage,' it said. 'But the recovery of cross-ocean routes, no matter the freight rate or trading volume, is relatively rapid based on the current situation.'
Ms Wang of Bocom added that scrapping the tax deal would hurt American shipping lines more than the city's home-port carriers, echoing the Hong Kong Government's view.