The government in Hong Kong was urged to reduce corporate taxes further in line with the global trend, Zetland Financial Group reports on its website.

Yvonne Law Shing Mo-han, chairman of the Hong Kong Institute of Certified Public Accountants' taxation committee, said providing increased tax relief would lure more corporations to base regional headquarters in the territory.

She said the institute supports Hong Kong Chief Executive Donald Tsang's call to reduce the corporate profits tax and standard rate of salaries tax by 1 percent to 16.5 percent and 15 percent. But Law added she believes "there is room for further cutting in the years to come."

"It's not a secret that various jurisdictions use tax incentives to increase their appeal as business centers, and Hong Kong is no exception," Law said. "We advocate giving regional headquarters full profits tax exemption for management and consultancy income derived by the Hong Kong entity from associated overseas entities."

The institute also called on the government to apply "polluter pays taxes" including electronic road pricing, fuel duties, air and water pollutant taxes, and other resource consumption taxes.

Hong Kong will probably post a record budget surplus of HK$105.2 billion (US$13.5 billion) in the 2007-08 fiscal year and offer tax cuts as a result, according to PricewaterhouseCoopers LLP.

About HK$40 billion in tax relief may be announced by Financial Secretary John Tsang in his budget speech on Feb. 27, said Guy Ellis and Tim Lui, partners at PwC in Hong Kong.

"With the large budget surplus, we believe the government can afford to give out some concessions to help out the less fortunate in society," said Lui.

Hong Kong posted a second straight budget surplus of HK$58.6 billion in the 2006-07 year. The government forecast another surplus of HK$25.4 billion for the year ending March 2008.

Hong Kong-based Zetland Financial Group provides an array of detailed financial analyses on its website each month. Since 1987, Zetland's professional consultants have tackled a range of business issues - from investment opportunities to jurisdictional changes in legal, tax and accounting matters - for clients around the globe.

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