LCQ6: Measures to assist small and medium enterprises amidst global financial turmoil

     Following is a reply by the Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Lam Tai-fai in the Legislative Council today (December 14):


     Under the impact of the debt crises in Europe and the economic downturn in the United States, the external trade of Hong Kong bears the brunt and its performance deteriorated substantially.  The Financial Secretary has also predicted that Hong Kong's export in the fourth quarter will continue to decrease and further hamper economic growth; there is little sign of optimism from exports to overall economic performance of Hong Kong early next year, and considerable uncertainties still cloud over economic performance in the latter half of the year.  Indeed, many operators of small and medium enterprises (SMEs) have relayed to me that they are facing a series of problems in operations such as drastic decreases in orders, difficulties in financing, arrears from clients in payments for goods, high risks, high costs and high inflation, etc. and that the crisis at present is even more acute than that during the financial tsunami.  In this connection, will the Government inform this Council:

(a)  given that the Special Loan Guarantee Scheme (the Scheme) launched during the financial tsunami had effectively mitigated the financing difficulties of SMEs, and the sector has strongly requested the Government to relaunch the Scheme, but the Government has so far not agreed to respond to their request, of the situation of Hong Kong's overall economic performance which the Government expects to prevail before it is prepared to relaunch the Scheme;

(b)  whether it will consider allowing more SMEs to defer prepayment of profits tax and offering concessionary tax rates to SMEs with turnovers or profits below a certain threshold, so as to facilitate their capital flow and assist them in dealing with the economic difficulties at present; if it will, of the details; if not, the reasons for that; and

(c)  given that the authorities indicated in their reply to a question raised by me on November 9 this year that they had already proposed six amendments to the Competition Bill to give practical responses to the major concerns of various sectors, especially SMEs, but some SMEs have reflected that the six amendments still fail to alleviate the worries of SMEs and effectively resolve the numerous contentions, resulting in SMEs having to face even more uncertainties, whether the Government will, in response to the continuous deterioration of the global economic environment, consider afresh not to insist on completing the legislative exercise for the Bill within the current legislative session; if it will, of the details; if not, the reasons for that?


Acting president,

(a)  The Government introduced the "Special Loan Guarantee Scheme" (SpGS) in December 2008.  It was an exceptional measure introduced during exceptional times to help enterprises tide over the credit crunch problem arising from the global financial crisis effectively.  With the recent sharp downturn in the external economy, Hong Kongˇ¦s economy will face greater downside risks next year.  In face of the gloomy macroeconomic outlook, we understand the requests from the trade seeking the Government to introduce effective support measures, such as re-launching SpGS.  

     In face of the risks of economic downturn, just as how we tackled the financial crisis in 2008, the Government would introduce effective support measures in a timely manner according to the situation to tide the trade over the difficult times.  Firstly, the Hong Kong Mortgage Corporation Limited has launched a series of enhancements to the SME Financing Guarantee Scheme (SFGS) in October this year, which include allowing the SFGS's refinancing of revolving facilities previously guaranteed by the SpGS of the Trade and Industry Department upon expiry of such guarantee; and increasing the total loan limit of high interest rate loans (i.e. loans with interest rate over 10%) from HK$50 million to HK$100 million per financing bank etc.  These enhancements should help encourage banks to make effective use of the SFGS to meet the financing needs of the enterprises including small and medium enterprises (SMEs), especially during times of credit market stress and adverse economic climate.

     In addition, the Hong Kong Export Credit Insurance Corporation has launched three enhanced measures earlier this month, i.e. waiver of annual policy fee for one year, offering three free credit assessments of buyers and expediting the processing time of credit limit applications, so as to assist Hong Kong exporters in coping with the challenges amidst the difficult trading environment.

     We will continue to closely monitor the changes in the economic situation and financial markets and introduce enhanced support measures when necessary.  

(b)  The existing single profits tax rate has already reflected the fairness principle of "earning more, paying more; earning less, paying less" .  In the year of assessment 2009-10, only about 83 000 corporations, accounting for 12% of registered corporations, paid profits tax.  Nearly 90% of the corporations do not pay any tax.  The majority of the SMEs either do not have to pay any tax or pay very small amount of tax.  Nevertheless, in formulating the 2012-13 Budget, the Financial Secretary will consider carefully appropriate measures to help enterprises rise to the prevailing challenges, having regard to the economic situation and the Government's fiscal position.

     As regards holdover of provisional tax, the existing Inland Revenue Ordinance has already made flexible arrangement to cater for changes in taxpayers' income or profits.  If taxpayers (including SMEs) expect that their income or profits for the current year would be less than 90% of that of the previous year, they may lodge, not later than 28 days before the due date for tax payment, applications to the Inland Revenue Department (IRD) for holding over the whole or part of the provisional tax accordingly.  In addition, if individual taxpayers are unable to pay tax on time due to financial difficulties, they may apply to IRD for paying tax by instalments.  We believe that the existing well-established arrangement can help those SMEs, whose profits are expected to decrease due to adverse economic circumstances, to arrange tax payment in a more flexible manner.

(c)  As regards the Competition Bill (Bill), the Bills Committee of the Legislative Council has deliberated on the Administration's six proposed amendments which seek to address the concerns raised by the stakeholders, in particular SMEs.  Members' overall feedback is positive and the direction of these amendments is much welcomed.  The Administration will continue to listen to the views of Members and the general public.

     The need for the enactment of a cross-sectoral competition law is manifested by the public concerns, including those of the SME operators, over the recent incidents of suspected anti-competitive conduct in certain sectors.  To meet the aspiration of the community, we will continue to work closely with the Bills Committee on its scrutiny of the Bill to forge consensus and strive for the enactment of the Bill within the 2011-12 legislative year.

Ends/Wednesday, December 14, 2011
Issued at HKT 15:40