Chinese bankers have eyes on Beijing's new income tax plan.
Under new tax rules, thousands of Chinese finance professionals in Hong Kong are likely to have to pay taxes back home. According to the plan, the top rate of tax in China is about 45%, which is far away more than Hong Kong’s 17%. Will this new global income tax plan pushes Chinese Bankers to leave Hong Kong? Chris Wong, Head of China, Selby Jennings has shared his view with eFinancial Careers.
45% Income Tax + Living in World's 6th Most Expensive City
Unsurprisingly, recruiters have received enquiries from Chinese bankers to relocate back to China. "Hong Kong is the world’s sixth-most expensive city for expatriates, while Shanghai only ranks 19th," adds Chris. "With the high living costs in Hong Kong plus 45% income tax, some Chinese banking professionals will start considering moving. As it will be difficult for a lot of these bankers to sustain their current lifestyles in Hong Kong."
But Chinese Bankers Are In Demand
It is quite clear that Hong Kong banks needs Chinese bankers. Firstly, the demands for Mandarin speaking and China network have always been essential for Hong Kong banks. Local Hong Kong or expatriates bankers are lack of these skills. Secondly, the future IPO and listings competition. “IBD is the function that needs the most Chinese talent," said Chris. "Especially given the recent competition between the Shanghai and Hong Kong exchanges. Recent competitions such as the increasing number of future IPOs and secondary listings from Chinese companies."
Dealing with Global Income Tax, Not Expecting Exodus
Chinese global income tax regime excludes permanent residents of Hong Kong and Macau. That is to say, this will likely to trigger a surge in Chinese bankers in Hong Kong to apply for residency. Or they will be remaining in the territory long enough to meet the seven-year qualifying period. “You would expect Chinese banking professionals who have Hong Kong residency not to be affected by the tax law,” says Chris. Moreover, the products offered in Hong Kong are quite different from those in the mainland. Chinese bankers in Hong Kong relocating back home will be a brand new start. And you will be surprised, banks might make good some of the differences in take-home pay to these Chinese bankers as part of the "expatriates package". But of course, banks need to be thoughtful to avoid risking on “discriminating” against non-mainland employees.
Hong Kong Remains Asia's Premier Financial Centre
“While there might be some outflow of mainland talent back to China, we don’t foresee a large number that would threaten Hong Kong’s status as a financial centre. Many Chinese banking professionals still see Hong Kong as one of Asia’s premier financial centres. The network of professional relationships they can still gain here is crucial for success in their careers,” says Chris. “Secondly, the international lifestyle in Hong Kong remains an attraction for a lot of banking professionals who have been living here for a long time. It would be difficult for them to leave that life behind,” said Chris.
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