Following is the speech (English only) by the Secretary for the Treasury, Miss Denise Yue, in moving the second reading of Stamp Duty (Amendment) Bill 2000 in the Legislative Council today (October 18):
I move that the Stamp Duty (Amendment) Bill 2000 be read the second time.
The Bill seeks to exempt the fixed stamp duty chargeable on a transfer of units when the units are issued or redeemed and when a constituent fund of a Mandatory Provident Fund (MPF) scheme is a party to the transfer; and to dispense with the requirement to stamp the relevant instruments of unit transfers. The underlying objective is to facilitate the smooth implementation of the MPF scheduled for implementation on 1 December 2000. To tie in with the commencement date of the MPF, we propose that the Bill should take effect also on 1 December 2000.
Under the Mandatory Provident Fund Schemes Ordinance, the entire workforce in Hong Kong, save for the exempted categories, for instance domestic employees and self-employed licensed hawkers, are required to join MPF schemes. An MPF scheme is governed by a trust. Contributions made into a Constituent Fund of an MPF scheme will be invested to generate profits which will eventually be accrued to the scheme members' interests. Investment may also take the form of investment in Approved Pooled Investment Funds.
A Constituent Fund under an MPF scheme and an Approved Pooled Investment Fund in which a Constituent Fund invests fall within the definition of a unit trust scheme under the Stamp Duty Ordinance. Under the existing Stamp Duty Ordinance, all the transfers arising from both the indirect allotment of units through fund managers either between a Constituent Fund of an MPF scheme and the scheme member or between a Constituent Fund and an Approved Pooled Investment Fund, as well as those arising from redemption of units between the same parties, are chargeable to the fixed stamp duty which is currently fixed at $5 per instrument of transfer. Moreover, all the relevant instruments of transfer in these transactions are required to be endorsed by the Collector of Stamp Revenue as not chargeable with ad valorem stamp duty in order to become duly stamped instruments which can be received as evidence in civil proceedings and can be acted upon, filed or registered by public officers and body corporates.
Given that around three million employees and self-employed persons will participate in MPF schemes, we expect that the number of transfers arising from indirect allotment of units through fund managers, and redemption of units which may be executed in a year will be huge. Our preliminary estimate is that the total number of such MPF-related transfers may involve 400,000 additional instruments a year, or some 1,500 documents a day. This amounts to 160% increase in the volume of transfers handled by the Stamp Duty Office in 1999-2000. The processing of these transfer documents involves cash or cheque collection, vetting, stamping and despatching documents.
To enable the Stamp Duty Office to cope with this additional workload while continuing to deliver its stamping service according to its performance pledge i.e. stamping to be performed within the same day, the Stamp Duty Office will require at least two additional clerical staff and a new franking machine, while the estimated revenue gain will only be $2 million a year.
Separately, the stamping requirements in respect of the various unit transfer transactions will complicate the procedures involved in investment transactions under MPF schemes, and add to the administrative burden of both the trustees and fund managers. Such extra administrative costs may be passed on to MPF scheme members, i.e. the employees and self-employed persons, and hence reduce the amount of retirement benefits eventually available to them.
In view of the above concerns, we propose, in this Bill, to exempt the four specific types of unit transfers under MPF schemes, from the requirement to pay the fixed stamp duty of $5 per transfer instrument and the requirement to submit the instrument of transfer to the Collector of Stamp Revenue for endorsement to the effect that it is not chargeable with ad valorem stamp duty. These exempted transactions are-
* first, indirect allotment of units by Constituent Funds under MPF schemes to scheme members through the fund managers;
* second, redemption of units in Constituent Funds by MPF scheme members;
* third, indirect allotment of units by Approved Pooled Investment Funds to Constituent Funds under MPF schemes through the fund managers; and
* fourth, redemption of units in Approved Pooled Investment Funds by Constituent Funds under MPF schemes.
This proposal will facilitate the smooth implementation of the MPF, by simplifying the procedures involved in investment transactions under such schemes, and reduce the administrative burden which may otherwise be imposed on both the trustees and managers.
President, with these remarks, I commend the Bill to Members.
End/Wednesday, October 18, 2000