Move to Hong Kong 'may increase HSBC's global tax bill'
Published 26/01/2016 | 02:30
HSBC's possible relocation to Hong Kong is unlikely to save the British bank much tax - one of its reasons for maybe moving abroad - and could actually increase its bill, a Reuters analysis of the company's filings shows.
HSBC said last year that it was considering a possible shift overseas from London, citing higher taxes and tighter regulation in Britain and a desire to be closer to faster-growing Asian markets.
Analysts said HSBC's former home in Hong Kong, with a corporate tax rate of 16.5pc against a British rate set to rise to 26pc , was the most likely destination.
Some investors have said weakening growth in Asia and a reduction in a British levy on banks' asset bases announced last year, argues for HSBC to stay put.
But some analysts say Asia's better long-term growth opportunities and Hong Kong's lower tax rate may yet hold attractions for the bank.
A Reuters examination of corporate filings shows that Hong Kong may offer HSBC fewer tax advantages than many believe.
That's because HSBC will struggle to move enough profit to Hong Kong to benefit from its lower tax rate. Indeed, it may have to report more income in Britain if it moves, since many of the overhead and borrowing costs now booked in Britain may in future be offset against more lightly taxed Hong Kong profits.
Also, Hong Kong's less generous treatment of share bonuses may cost HSBC millions of dollars in tax deductions each year.
Crawford Spence, Professor of Accounting at Warwick Business School, who has studied international groups' tax planning, said the Reuters analysis showed the "commonsense understanding" that HSBC would receive a big tax benefit was too simplistic. (Reuters)