Issue 2 Volume 19 April 2023 DRIVING BUSINESS SUCCESS RESHAPING RETIREMENT Ayesha Macpherson Lau, Chairman of the Mandatory Provident Fund Schemes Authority, on the upcoming eMPF Platform, and how the profession has equipped her to give back E-FILING PROJECT Roundtable discussion on the implementation of IRD’s e-Filing project so far HONG KONG TOURISM How organizations are positioning themselves for Hong Kong’s tourism revival SECOND OPINIONS What is critical to effectively meeting the ISSB Standards? PLUS: 50th anniversary special:
With a refreshed layout designed for easy browsing, the new A Plus website delivers a brand new experience to keep you up to date with the latest developments impacting the profession. Enjoy content on the revamped website carefully curated to help you catch up with Institute, accounting and business news and insights, as well as success stories that will inspire you. Whether browsing from your desktop or mobile devices, read up on the latest articles and seamlessly transition to articles on topics that interest you. As easy as it gets. Introducing the new A Plus website Pinpoint articles on specific topics, such as “sustainability” or “digital transformation” with the enhanced search function Bookmark articles of interest and read them later under the always present bookmark tab Find out what topics are covered at a glance with meta tags Consume content by the latest articles, issues, or under specific categories or topics, with options to view PDF or flipbook versions. ESG APLUS.HKICPA.ORG.HK
PRESIDENT’S MESSAGE APLUS April 2023 1 Loretta Fong President Dear members, “ This milestone marks half a century of excellence in the accounting profession, and we are proud to celebrate the achievements of our members and the contributions they have made to the industry.” In April, we announced the details of several important initiatives that will have an impact on the rest of the year and beyond, as we celebrate our 50th Anniversary and look towards a bright future for the accounting profession. Firstly, we recently announced the Institute’s latest Strategic Plan 2023. This ambitious plan sets out our vision for the future of the profession and our organization, reflecting the evolving needs of the industry and our commitment to staying ahead of the curve in a rapidly changing landscape. Our colleagues have created a series of highlights to introduce the main themes of the plan, which you can find on our social media channels. Details from our Strategic Plan were communicated during a luncheon hosted for representatives from key media outlets, during which we also shared exciting developments at the Institute and in the industry. I was thrilled to share the great progress we’ve made in achieving the Institute’s work plan on environmental, social and governance standard setting, nurturing accounting professional talents, and fostering international recognition, as well as capturing business opportunities in the Greater Bay Area (GBA). Indeed, we are already making great headway in achieving the goals we’ve set out. In March, we completed the first of a series of visits that the Institute has planned to promote Hong Kong’s accounting profession and explore new opportunities for our members in the GBA. A delegation to Nansha in the GBA, led by myself, met with local government officials and business leaders to explore opportunities for closer collaboration and exchange. The GBA represents a significant growth opportunity for our profession. This visit and the ones to come are a valuable opportunity for us to gain insights into the latest developments in the region and to build stronger connections with our counterparts in the accounting profession. Our visit to Nansha is also just one example of our commitment to engage with stakeholders across the industry. We’ve also been hard at work meeting with various counterparts in the past few months, and members can expect many more as we continue to solidify and promote the prestige of Hong Kong’s CPAs. If you’ve been keeping tabs, you’ll know that the Institute kicked off the celebration of its 50th Anniversary with the launch of the logo, theme, and the introduction of upcoming celebration events. This milestone marks half a century of excellence in the accounting profession, and we are proud to celebrate the achievements of our members and the contributions they have made to the industry and to society. The theme of our anniversary celebration is “Accounting for success now and beyond.” This reflects our commitment to honouring the past while looking ahead to the opportunities and challenges of the future. As part of these celebrations, we have invited members of the Institute who have achieved admirable success to share their experience with the Institute and impart words of encouragement to the next generation of CPAs – starting with Ayesha Macpherson Lau, Chairman of the Mandatory Provident Fund Schemes Authority. Be sure to read the first one on page 18 in what will surely be a series of inspiring interviews! We have also planned a series of events and activities to mark this occasion, including the exciting horse racing event in June, followed by a prestigious worldclass congress in July, and the anniversary gala dinner in December. Details on how to take part will be shared through our various communication channels, so be sure to stay tuned! As we continue to work towards our goals in 2023, I am excited to see the progress we make and the opportunities that lie ahead. The Institute is committed to serving the needs of our members and bringing the accounting profession to new heights as we celebrate 50 years of success. I look forward to working with all of you to achieve these goals and to build a stronger, more vibrant accounting profession in Hong Kong and beyond.
CONTENTS Issue 02 Volume 19 April 2023 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 A new era of profits tax filing Experts discuss the importance of the e-Filing project to Hong Kong and how taxpayers are responding to the changes 14 Making a comeback How Hong Kong attractions are positioning themselves for the tourism revival 18 50th Anniversary Interview Series: Ayesha Macpherson Lau The Chairman of the Mandatory Provident Fund Schemes Authority on specializing in tax and how CPAs have inspired her to contribute to society SHORT PROFILES 26 Q&A with a PAIB Eileen Li, Operations Manager at HashKey Capital 27 Q&A with a PAIP Ambrose Chan, Partner at United CPA & Co. 40 Young member of the month Amanda Yuen, Senior Manager at Mazars in Hong Kong COLUMNS 23 Thought leadership: Ada Chung The Barrister and Privacy Commissioner for Personal Data on why companies need to proactively safeguard the security of personal data 24 Second opinions What is critical to effectively meeting the ISSB standards? 42 Meet the speaker An e-Series course covers essential information on SPACs SOURCE 30 Classification of liabilities as current or non-current: what’s new? A n overview of the key changes from the current HKAS 1 due to A roundtable discussion covering the first phase of the Inland Revenue Department’s e-Filing project, and how businesses can transition successfully 26 Q&A with a PAIB 27 Q&A with a PAIP 08A new era of profits tax filing
DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Managing Editor Jemelyn Yadao Contributors Nicky Burridge and Jolene Otremba Registered Office 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Loretta Fong Vice Presidents Roy Leung Edward Au Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Rebecca Tam Publication Manager Michael Wong Editorial Coordinator Maggie Tam Office Address 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk the amendments issued in 2020 and 2022 32 Proposed amendments to the IFRS for SMEs Accounting Standard The Institute’s response to the IASB Exposure Draft Third edition of the IFRS for SMEs Accounting Standard 34 Hong Kong needs an updated intellectual property-related tax regime Intellectual property-related tax issues faced by Hong Kong companies in the innovation and technology sector 36 ISSB exposure drafts and Link Asset Management Limited: case study for streamlining ESG KPIs The company’s experience in adopting the ISSB’s proposed standards 38 Technical news 40Young member of the month A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. ©Hong Kong Institute of Certified Public Accountants April 2023. The digital version is distributed to all 47,057 members, 14,342 students of the Institute and 2,183 business stakeholders every quarterly. 14 Making a comeback The role CPAs play in helping attractions be flexible amid Hong Kong’s tourism rebound
The Institute has launched its 50th anniversary celebrations, encompassing a variety of events and activities taking place over the coming months. All the events, initiated by the Institute’s Council and 50th Anniversary Organizing Committee, are designed to connect the profession with the public and to showcase the incredible work that members have done since the Institute’s inception in 1973. To begin marking this incredible milestone, the Institute has introduced its 50th anniversary logo. Incorporating the wing from the Institute’s logo that is coloured the red of Hong Kong’s bauhinia flag, the number 50 encompasses the Institute’s vital role as the guardian of the city’s financial system over the past five decades. The logo is further embellished with fireworks that are the same colour as the Institute’s remaining wings. The theme, “Accounting for success now and beyond,” reflects our achievements over the past half century, as well as the Institute’s and the profession’s continued efforts to remain mainstays of Hong Kong’s development as an international financial centre. The celebrations will be kickedoff with members being invited to a “50th Anniversary Cup” horse racing event in June. This will be followed by a prestigious global congress during the summer that will bring some of the world’s leading minds in business together, and then a gala dinner to honour the most esteemed members at the end of the year. Members will be kept up to date on all of the latest news and information about the campaign via email and social media. Strategic Plan 2023 out now The Institute published its Strategic Plan 2023, which lays out the direction and goals for the organization over the next year, and reflects its commitment to championing the accounting profession in Hong Kong and beyond. The plan was developed and refined after the annual review of the Strategic Plan undertaken by Council, taking into consideration the latest opportunities and challenges with members’ best interests in mind. A number of the actions and initiatives included in the 2022 plans have been completed but many others are ongoing and will be complemented by newly developed actions to ensure all challenges continue to be addressed. Major objectives of the plan include contributing to the city’s sustainability journey, cultivating internationally recognized talent, building a positive image for the profession, as well as facilitating opportunities in the Greater Bay Area (GBA). Institute promotes the Hong Kong profession in GBA Institute President Loretta Fong led a successful delegation and represented the Institute at a forum, both in Nansha, Guangzhou. During the visit at the end of March, the delegation met NEWS Institute news Business news 4 April 2023 Institute’s 50th anniversary celebrations begin
APLUS Disciplinary finding Lee Sun, Antony Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of integrity under section 110.1 A1(a) and subsections R111.1 and R111.2 under Chapter A of the Code of Ethics for Professional Accountants; the fundamental principle of professional competence and due care under section 110.1 A1(c) and subsection R113.1 of the Code; Hong Kong Standard on Quality Control 1 Quality Control for Firms that PerformAudits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements; Hong Kong Standard on Auditing (HKSA) 230 Audit Documentation; and HKSA 500 Audit Evidence; and being guilty of professional misconduct. Lee was the sole practising director of JTBC CPA Limited (practice) which was registered in February 2015. The practice was subject to an initial practice review (review) by the Institute’s Quality Assurance Department which was concluded in October 2020. The review identified significant findings which led to concerns over Lee’s lack of integrity, and professional competence and due care, demonstrated by (i) his conduct in response to the review, in particular, the creation of working papers, and provision of false or misleading information/ representations; (ii) deficient quality control system of the practice; and (iii) the lack of audit quality in the practice’s audit engagements. Decisions and reasons: Lee admitted to the complaint against him. The Disciplinary Committee found that Lee had been guilty of professional misconduct. The committee reprimanded Lee and ordered that the name of Lee be removed from the register of CPAs for 18 months and his practising certificate be cancelled with effect from 31 March 2023. He was ordered to pay a penalty of HK$200,000 and the costs of the disciplinary proceedings of HK$71,298. Details of the disciplinary finding are available on the Institute’s website. with local officials, industry leaders, and accounting professionals to learn more about the business landscape and regulatory environment in Nansha. This was the first of a series of visits that the Institute has planned with the support of the Hong Kong government’s Professional Services Advancement Support Scheme fund to promote Hong Kong’s accounting profession and explore new opportunities for members in the GBA. Later in April, over 100 attendees from around the region, including representatives from the Hong Kong Liaison Office and the Hong Kong and Macao Affairs Office of Guangdong Province, gathered to participate in a forum focused on issues revolving modern accounting services and the high-quality development of the GBA. The President delivered a keynote speech on environmental, social and governance matters that was well received by the attendees. Institute’s response to the 2023-2024 Budget The Institute welcomed the 2023-2024 Budget, which was announced on 22 February and included numerous suggestions made by the Institute in its budget submission. It is hoped that the budget will help the city get back on track, revive the economy in the post-COVID era, and reconnect Hong Kong with the international community. However, the Institute believes that the government could also formulate more targeted measures so as to enhance Hong Kong’s competitiveness in the medium and long-term. Read the Institute’s press release to learn more. Institute to host CPA Sports Carnival 2023 For the first time, the Institute will co-host the CPA Sports Carnival 2023 with The Society of Chinese Accountants &Auditors on 7 May at Siu Sai Wan Sports Ground. Themed “Happy 香港•活力 CPA,” the event aims to bring professional accountants together in a fun way, through engaging in different sports, and to share the benefits of exercise. Fun booths have also been prepared for CPAs to bring along friends and family. Council meeting minutes The abridged minutes from the January, February (Strategy Day) and March 2023 Council meetings are now available. A delegation, led by Loretta Fong, President of the Hong Kong Institute of CPAs, in Nansha, Guangzhou April 2023 5
招標公告 Tender Notice 為立法會議員的工作開支償還款額申請 提供審計監察服務 Provision of Compliance Audit Services on Legislative Council Members’ Claims for Reimbursement of Operating Expenses 現藉 此 公告 邀 請 會 計師 承 投 就立 法 會 議 員 的 工 作 開 支 償 還 款 額 申 請進 行 審計 工作。此項審計工作每年進行，旨在確保議員提交的申請符合《立法會議員申請 發還工作開支的指引》所訂的利益衝突及利益申報條文，藉以提高該等申請的 問責性和透明度。 Certified Public Accountants are invited to tender for the conduct of audit in respect of Legislative Council Members’ claims for reimbursement of operating expenses. This annual audit seeks to assure that Members’ claims are made in compliance with the provisions on conflict of interest and declaration of interest stipulated in “A Guide for Reimbursement of Operating Expenses for Members of Legislative Council” with a view to enhancing the accountability and transparency of such claims. 招標文件可於辦公時間內(星期一至星期五上午 9 時至下午 6 時) 向立法會秘書處 行政部索取 (地址：香港中區立法會道1 號立法會綜合大樓；電話：3919 3085； 電郵：t ender@l egco.gov.hk)。 The Tender Documents can be obtained during office hours (9:00 am to 6:00 pm, Monday to Friday, except public holidays) from the Administration Division of the Legislative Council Secretariat (Address: Legislative Council Complex, 1 Legislative Council Road, Central, Hong Kong; Telephone: 3919 3085; Email: tender@l egco.gov.hk). 投標者須於2023年6月1日下午3時或之前，把競投承辦此項服務的標書放入立法會 綜合大樓地下公眾入口2標明上述投標項目的投標箱(“指定投標箱”)內。倘若在 2023年6月1日上午9時至下午3時期間，黑色暴雨警告或8號或以上熱帶氣旋警告 信號或政府公布的超強颱風後的“極端情況”生效，或立法會綜合大樓關閉，截止 投標時間將順延至下一個工作天的下午3時(而當天上午9時至下午3時期間的任何 時間，黑色暴雨警告、8號或以上熱帶氣旋警告信號或政府公布的超強颱風後的 “極端情況”不曾生效，而立法會綜合大樓不曾關閉)。逾期遞交的投標書或沒有放入 指定投標箱內的投標書，一概不予受理。 Tenders for the service shall be deposited in the Tender Box marked with the title above (“Specific Tender Box”) situated at Public Entrance 2, G/F, Legislative Council Complex by 3:00 pm on 1 June 2023. In case a Black Rainstorm Warning or a Tropical Cyclone Warning Signal No. 8 or above is in force, or “extreme conditions” was announced by the Government after super typhoons, or the Closure of the Legislative Council Complex takes effect for any duration between 9:00 am and 3:00 pm on 1 June 2023, the Tender Deadline will be extended to 3:00 pm on the next working day on which no Black Rainstorm Warning or Tropical Cyclone Warning Signal No. 8 or above, or “extreme conditions” after super typhoons announced by the Government is or are in force, and no closure of the Legislative Council Complex takes effect, for any duration between 9:00 am and 3:00 pm on that day. Late tenders and tenders not deposited in the Specific Tender Box will not be considered. 立法會秘書處 Legislative Council Secretariat
NEWS Business The codename of the plan to split EY’s global audit and consulting units, which was called off in April after resistance from affiliates in some countries. The proposal was originally brought up after regulators once again voiced concerns about conflicts of interest within the Big Four. €500,000 The amount that EYGermany was fined by regulators in April for “breaches of duty” related to its audits of Wirecard. The firm has also been banned from taking on any new audit for public interest entities in Germany for the next two years. The government announced the details of its “Happy Hong Kong” campaign, which offers a range of activities and events designed to help stimulate local consumption and the economy. At a press conference on 24 April, Financial Secretary Paul Chan said that 29 April would be “Hong Kong Cinema Day 2023,” where all cinema tickets across the city will cost HK$30 each. The government will also organize a series of food markets from this month to June, as well as a carnival. April 2023 7 How accurate ChatGPT was at answering accounting assessment questions – including on topics such as audit, management accounting and tax – from 186 institutions around the world. Human students scored an average of 76.7 percent, in the study carried out by the American Accounting Association. 20 The number of mid-sized firms that are represented by the Association of Practising Accountants in the United Kingdom, which called on the U.K.’s Big Four to share their audit expertise and technology, reported the Financial Times. Partners at some of the four cited problems including how liability would be shared and getting the agreement of their global networks. 29 years – Emmanuel Faber, International Sustainability Standards Board (ISSB) Chair. At its meeting on 4 April, the ISSB decided that it will complement its package of transitional reliefs to support companies applying the ISSB’s first two standards. The relief means companies can prioritize putting in place reporting practices and structures to provide information about climate-related risks and opportunities in the first year of reporting using the ISSB standards. Project Everest <50% How long KMPG had been the auditor for Silicon Valley Bank when the firm gave the bank a clean audit opinion on 24 February, 14 days before the bank collapsed. Rules in the United States do not stipulate that companies should rotate their audit firm, but set out that the audit partner responsible must change at least once every five years. The amount that Deloitte’s China unit was fined by China’s Ministry of Finance in March after deficiencies were found in the firm’s audit of China Huarong Asset Management. The violations included not gathering sufficient audit evidence and failing to show professional scepticism. ¥212 million Howmuch Hong Kong’s economy is predicted to rebound in 2023, according to Financial Secretary Paul Chan in his Budget speech. Hong Kong suffered a contraction of 3.5 percent in 2022 as a result of the pandemic. 3.5% to 5.5% APLUS “This transitional relief ensures companies can phase in their approach, initially focusing on the quality of the climaterelated information they provide.”
TAXATION e-Filing project A new era of profits tax filing SPEAKERS: (From left) JAMES LIU Finance Director, IKEA at DFI Retail Group EMILY CHAK Tax Partner at PwC EDMUNDWONG Member of the Legislative Council of Hong Kong, Accountancy Functional Constituency LEUNG KIN-WA Deputy Commissioner (Operations) of the Inland Revenue Department CHARLES LEE South China (including Hong Kong SAR) Tax Leader at PwC THOMAS LEE Assistant Vice President for Group Taxation at PCCW 8 April 2023
APLUS As the Inland Revenue Department (IRD) continues on its mission to go digital, businesses and the profession are watching the changes unfold. In 2021, the IRD embarked on a major digitalization process to digitalize the filing of profits tax returns in Hong Kong, titled the “e-Filing project.” This month, the IRD rolled out the first phase of the project, with a voluntary e-filing period commencing on 1 April 2023. Amid this development, A Plus organized a roundtable discussion at the newly built Inland Revenue Centre in Kai Tak, to gather views from tax and accounting practitioners on the impact of the first phase, and how businesses can deal with those changes and transition successfully. To kickstart the event, the IRD representatives briefly explained the reasons for the e-Filing project and its importance for Hong Kong. “We’ve come a long way in this digitalization journey, and this year we have launched the new e-filing system,” said Leung Kin-wa, Deputy Commissioner (Operations) of the IRD, and a member of the Hong Kong Institute of CPAs. “We are doing this to be in line with the government’s commitment to make Hong Kong a smart city and also to make sure we fall in line with international practices around tax filing.” Aside from these overarching reasons, digitalizing Hong Kong’s tax filing also aims to enhance convenience, accuracy and make the overall tax administration become more environmentally-friendly. “From an environmental point of view, electronic tax filing saves paper and may help fulfil ESG requirements,” Leung explained. “And from a tax point of view, it is faster, more efficient and it’s actually better for companies because its brings everything together on to one platformwhich makes doing taxes easier. We’ve already come quite far on this journey.” Leung pointed out that up until recently, only a A roundtable discussion highlights the impact of this month’s roll out of the first phase of the Inland Revenue Department’s e-Filing project, and how Hong Kong businesses can best prepare themselves for the change. Jolene Otrema reports Photography by Calvin Sit April 2023 9
TAXATION e-Filing project small number of profits tax returns could be filed electronically through the IRD’s eTax Portal. Most returns were submitted in paper form because of limited data uploading capacity in the IRD’s information technology (IT) infrastructure. A peer review report on the exchange of information on request of Hong Kong, conducted by the Organization for Economic Co-operation and Development (OECD) in 2019, recommended that Hong Kong should take measures to ensure that accounting records for all businesses become available. Considering the issuance of a large number of profits tax returns and processing of voluminous accounting and financial data of companies in the city, there was a real need to collect and process accounting and financial data electronically. Following a series of consultations with key stakeholders and recommendations from the OECD, the IRD began its tax digitalization journey in 2021 with a taxonomy package proposal and introduction of the Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021, among others, to enhance the mechanism for furnishing tax returns. The taxonomy package is essentially a classification system that identifies and structures information in financial statements as well as tax computations and supporting schedules so that the information can be tagged and exchanged in an electronic format. This is an important first step to standardizing account reporting for e-filing. Alongside the taxonomy package, the IRD also developed the IRD iXBRL Data Preparation Tools (the Tools), which allow taxpayers to convert financial statements and tax computations into inline eXtensible Business Reporting Language (iXBRL) data files, a standardized and specific international computer format for e-filing purposes. Together, these trigger changes not only to the tax filing format but also behaviour in the preparation of audited financial statements in paper form. “Practitioners will have to adopt basic knowledge of iXBRL and learn how to tag financial and tax documents in a different way,” Leung explained. The entire tax digitalization process will be rolled out in phases. The first phase, already launched this month, enhanced the existing eTax Portal to enable more businesses to voluntarily e-file their tax returns together with financial statements and tax computations in iXBRL format. The second phase will be the implementation of mandatory e-filing of tax returns starting with large multinational enterprise (MNE) groups and then progressing on to small- and medium-sized enterprises (SMEs), with the ultimate goal of achieving full-scale mandatory e-filing by 2030. “We hope that this year, taxpayers will begin to migrate and file voluntarily their profits tax returns online through the existing eTax platform, but if you don’t want to sign the tax return digitally right now, there is still an option to print a simplified tax form out and sign it physically after uploading the data files,” Leung explained. “We call this a semi-electronic filing mode,” he added. “So while digital filing is optional, taxpayers can continue using paper mode, or a combination of both for now.” Embracing the changes “The implementation of voluntary e-filing this year has brought about some changes that practitioners “ Practitioners will have to adopt basic knowledge of iXBRL and learn how to tag financial and tax documents in a different way.” 10 April 2023
APLUS need to be aware of,” Bo Bo Hui, Chief Assessor of the IRD, and an Institute member, who is the officerin-charge of the e-Filing project, said. “Firstly, companies will now have to file tax returns and profits tax returns together with supporting documents. This includes small corporations and businesses with gross incomes not exceeding HK$2 million. In the past, they would have been exempt from furnishing supporting documents when filing their profits tax returns. “Secondly, the IRD has upgraded its existing IT infrastructure to enhance processing capacity and strengthen the provision of digital services. Taxpayers are encouraged to upgrade or develop their own computer programs which are capable of converting their existing financial statements into the required iXBRL data files for e-filing purposes.” The IRD says it is fully equipped and stands ready to provide assistance as taxpayers make the transition. “The IRD knows this is something new, especially for smaller companies. This is why we have developed the Tools online to assist taxpayers to convert their financial statements and tax computations into iXBRL data files. We have also uploaded detailed guidance, frequently asked questions (FAQs) and even provide an e-appointment service, online demonstration and training sessions so that taxpayers don’t have to struggle,” Hui assured. Referring to the Tools, which consists of a tagging tool and template tool, Hui noted that these were designed with taxpayers in mind, with the template tool specifically built to help smooth the adoption and accounting process for smaller companies. “Big companies won’t be able to use the template tool. We recommend that they use the tagging tool,” she explained. With this tool, corporations or businesses can import their financial statements in Microsoft Word format and tax computations in Microsoft Excel format directly into the tool and then tag the accounting and tax data for generating the iXBRL data files. An auto-tagging function is included in the tagging tool to assist the users. To get a broader view of how taxpayers are responding to these developments, Emily Chak, Tax Partner of PwC, and moderator of the roundtable, asked the participants to share their observations on the industry’s response so far. According to Edmund Wong, Member of the Legislative Council of Hong Kong, Accountancy Functional Constituency, and an Institute member, the e-Filing project was a long time coming. “From the government’s point of view, this is a good thing because we have fallen behind. Singapore and other countries are more advanced and we need to change the way we do things,” he said. Based on a wide range of feedback, Wong concluded that general opinion is supportive of this initiative for the long run. “They understand the pressure to comply with international standards and that we need to be on par with our competitors and other countries, and frankly, it will be easier for IRD to do their job,” he said. James Liu, Finance Director of IKEA at the DFI Retail Group and an Institute member, offered a retailer’s point of view, and agreed that this is a step in the right direction especially in boosting Hong Kong’s international image. “They have been doing this overseas for a long time now, and in Hong Kong, we want to attract talents. But when they come here and look at us, they might wonder why we haven’t got this? This needs to be addressed. How can we digitalize and promote our international image?” he said. Thomas Lee, Assistant Vice President for Group Taxation at PCCW and an Institute member, who was involved in the pilot run of the e-filing system, also voiced his support for the IRD’s initiative. “ This is a good thing because we have fallen behind. Singapore and other countries are more advanced and we need to change the way we do things.” April 2023 11
TAXATION e-Filing project “There are more digital natives in the workplace today, and for this reason, companies are increasingly likely to embrace new technology changes,” he noted. “In the past, some people might remain sceptical, but nowadays, there isn’t a lot of pushback against new technology. Instead, they are keen to know how to use it, how it can benefit their companies, how it can be integrated with existing operations and platforms, and how it can add value to their businesses,” he said. Expected initial issues Of course, transitions aren’t always smooth. However, Leung assured taxpayers and practitioners that the IRD understands that change takes time, so it has introduced further extensions for adoption of voluntary e-filing and will allow room for errors to address technical issues that may arise, and will take a lenient approach in assessing the accuracy of tagging. “The IRD understands that tagging is new to all taxpayers,” Hui added. “But during the transition period, the IRDwill be more lenient. For example if you incorrectly tagged an item as electricity instead of entertainment, but it doesn’t affect your overall profits, it won’t trigger an error and there will be no penalty actions. It will get looked at on a case-by-case basis.” Leung further assures taxpayers, pointing out that the IRD is now working hard to come up with potential scenarios and common errors and the relevant penal action. “We understand that this is all new and taxpayers are bound to make some mistakes,” Leung said. “Penalties will be considered on a case-by-case basis. We will look at why there was an error in the first place and whether there should be a penalty. We are also addressing these in our FAQs, which were published on 3 April on the IRDwebsite.” The IRD believes a long transitional period is the best way to allow people to get used to the new e-filing system. At the same time, it hopes that these leniencies will encourage an early uptake. Charles Lee, PwC’s South China (including Hong Kong SAR) Tax Leader and an Institute member, pointed out that MNCs aren’t surprised by the changes, and because some have already been using e-filing for their tax management and compliance in other countries including in Mainland China, they generally welcome e-filing which aligns with international practice. For local companies, however, there could be practical challenges for them upon first-time adoption. “Local companies would consider the need to upskill staff and upgrade technology for a smooth transition, so it is likely that they will adopt a phased approach, which would allow them to have sufficient time getting prepared,” he said. IKEA’s Liu agreed, adding that implementation, though voluntary for now, implies the need for speed and cost. “That is key. The faster the IRD rolls it out, the more it will cost as you have to figure out how to support the talent in-house or get external advisory,” he explained. Calling it an egg and chicken situation, he recommended that the government could also offer more financial assistance to encourage faster adoption. “That would be best,” he said. Wong anticipated that small companies that don’t outsource the e-filing to service providers or use audit firms will face a skills problem. However, he encouraged SMEs to keep an open mind regarding this newway of filing profits tax returns and not to see it as an inconvenience, as well as make use of all the help that the IRD is offering. Leung agreed, adding that: “e-filing is an essential step in our digital journey. I believe this shouldn’t be a problem for many MNCs, while for SMEs – I do believe they should try to get familiar with this system as early as possible. They shouldn’t be mistaken that only large corporations should use this system.” According toWong, e-filing would also significantly help businesses experiencing manpower problems or talent shortages, as it would make it easier to sign than paperwork and streamline the whole process. “In the long run, this will significantly reduce the back and forth between staff and this is a good thing,” he said. “But it takes time to “ Local companies would consider the need to upskill staff and upgrade technology for a smooth transition, so it is likely that they will adopt a phased approach.” 12 April 2023
APLUS The e-Filing project is being implemented in two phases. The first phase, launched this month, enhanced the existing eTax Portal to enable more businesses to voluntarily e-file their tax returns together with financial statements and tax computations in iXBRL format. The second phase will be the implementation of mandatory e-filing of tax returns starting with large multinational enterprise groups and then progressing on to small- and medium-sized enterprises. adjust and we know this. By 2030, I am sure we will all be ready to move away from paper.” Corporate taxpayers are not alone. Liu surmized that experienced tax experts will also face a skills challenge. “To have experience means that they are older, and will have to learn to use the technology, unlike the newcomers who are digital natives but lack the industry experience, so it’s a question of how do we upskill?” “Ultimately, the skill issue goes beyond e-filing,” commented Charles Lee. “Digitalization is the global trend and when technology comes into the tax practice, it’s a journey where both tax experts and taxpayers should stay ahead with the trend. There are new technologies and software that could greatly add value to the industry, but collectively we have been stuck in our old habits. That’s why we’ve also begun hiring students with a background in STEM subjects in addition to accounting.” Considering the experience overseas Chak then asked the participants’ thoughts on the key success factors for a smooth transition. Collectively, the participants agreed that a successful transition to e-filing will require two things on the part of companies: retraining staff to use the technology and software around e-filing, including converting files to the iXBRL reporting standard, and having a positive mindset change. In the United Kingdom, iXBRL filing was first introduced in 2010 by Her Majesty’s Revenue and Customs and Companies House. Liu, who was working in England at the time, said that responding to the new regulation was all about effective change management. “The beauty is that Hong Kong is offering a long transitional period. There are less penalties for making mistakes and companies are more likely to go ahead and try and do it, and deal with the mistakes when they creep up later,” he said, noting that other countries have implemented it in a more rigid manner. “So once you’ve done it, the second time is about fine tuning, and by the third time it will be smooth. That’s the way these things go, but it’s all about taking that first step,” he added. Drawing on his own international experiences, Wong said he expects bigger companies to have less difficulties as this is nothing new for them. He also applauded the current measures put in place by the IRD to help SMEs and said that that should be a motivating factor for smaller companies to get going. Charles Lee echoed this sentiment. “E-filing was always inevitable and to some extent. Hong Kong is a little late relative to the rest of the world. It is a great opportunity to promote this in the postCOVID-19 era as I’m confident that having been through the pandemic, all organizations will maintain a more positive attitude to this development. Taking the first step to embrace the change and familiarize with the policy is key.” Thomas Lee then voiced his hopes that the platforms and tools in place nowwould continue to evolve based on feedback. “This shouldn’t be the only version, this is just version one. I hope there will be a channel for businesses and professional firms to give feedback to the authorities so that the technology infrastructure can continue to improve and create more value for all parties, and that would create a win-win situation for all,” he said. At the end of the day, the e-Filing project will be more than just a standardization exercise, but also about solidifying Hong Kong’s position as an international financial centre. “I think digitalization is a key milestone for Hong Kong in paving its way forward to become a future smart city,” said Liu. “It is also a way to achieve sustainability which is a key foundation to building a future for generations to thrive.” April 2023 13
TOURISM Business strategy In December 2022, Ngong Ping 360 launched its Crystal+ cabin – marking the first upgrade to its cable-car experience since 2009. “We launched this brandnew cable car experience so that tourists can enjoy a new experience from us. It is important to give our guests a sense of novelty when they visit to keep things fresh,” Kathy Yuen, Head of Finance at Ngong Ping 360 and a member of the Hong Kong Institute of CPAs, explains. Like Ngong Ping 360, other attractions across Hong Kong are taking steps to capture the rebound in tourists since anti-pandemic measures were eased. But visitor numbers remain well-below their pre-COVID-19 level, while those who do come are looking to spend their time in different ways. Tourist numbers fell sharply during the pandemic, with Hong Kong receiving just 1,603 overnight visitors for the whole of March 2022, according to Hong Kong Tourism Board (HKTB) figures. “The pandemic has had a huge impact on the tourism industry. More than 80 percent of visitors to the cable car used to come from overseas, so it went from 80 percent to a small percent,” Kathy Yuen says. Following the reopening of the border on 6 February, there has been a rebound in tourists, with nearly 775,000 overnight visitor arrivals in February this year, according to HKTB statistics. Unsurprisingly, more than twothirds of these visitors were from Mainland China, with tourists from short haul markets, such as Taiwan and Southeast Asia, also showing a strong increase. But numbers remain well down on their level before the pandemic. HKTB forecasted in early January that a total of 25.8 million tourists will visit Hong Kong in 2023 – around 46 percent of the average annual total seen between 2017 and 2019. Institute member Gloria Yuen, Finance Director – Asia at Madame Tussauds Touring Exhibition Ltd., also points out that the majority of early visitors were not tourists, but rather people coming to Hong Kong for family reunions or to shop. The situation is starting to change, and she says Madame Tussauds has seen an increase in tourist numbers following the end of the face mask mandate. “We are projecting a significant recovery to start from the May Labour Day holidays and hopefully continue during the summer holiday,” Gloria Yuen adds. Ysanne Chan, Deputy Chief Executive and Chief Financial Officer, Ocean Park Corporation, and an Institute member, says since Chinese New Year, there has been a noticeable increase in the number of tourists visiting the parks. “This has left us feeling optimistic about the future and we anticipate a gradual increase in the number of Mainland travellers in the coming months,” she says. MAKING A COMEBACK Amid Hong Kong launching its global promotion campaign after three years of strict COVID-19 restrictions, Nicky Burridge talks to Institute members working in the tourism sector about how organizations are positioning themselves for the rebound, and the role CPAs play in helping the sector take advantage of the tourism revival Illustrations by Gianfranco Bonadies “ We are projecting a significant recovery to start from the May Labour Day holidays and hopefully continue during the summer holiday.” 14 April 2023
APLUS Government campaigns To help encourage tourists to come back to Hong Kong, the government launched a global promotion campaign under the tagline “Hello Hong Kong” in February. It includes the release of promotional videos by HKTB which have reached 200 million people worldwide, as well as giving away 500,000 airline tickets by airlines and the Airport Authority Hong Kong, initially to people in Southeast Asia, followed by Mainland China, Northeast Asia, and other markets. HKTB is also distributing consumption vouchers to one million visitors, while 700 trade and media representatives, celebrities and influencers were invited to the city in the first three months of the year to generate interest in Hong Kong as a destination. Jamie Mak, an Institute member and General Manager, Corporate Services at HKTB, adds: “HKTB will join at least 22 large-scale trade shows in meetings, incentives, conferences and exhibitions (MICE), leisure, and cruise tourismwith trade partners to demonstrate Hong Kong’s tourism appeal to the worldwide market. A series of iconic mega events will also make a comeback and be restored to a scale comparable to pre-pandemic editions.” These events include the Hong Kong International Dragon Boat Race in June, a Hong Kong Cyclothon, a Hong KongWine & Dine Festival and the promotion of regular fixtures such as the Hong Kong Marathon, the Hong Kong Sevens and Art Basel. Gloria Yuen welcomes the campaign, but thinks the issuing of the free airline tickets could have been handled better. “It created noise in the market, but nobody knew the exact mechanics for their release until almost one month later.” She April 2023 15
TOURISM Business strategy adds that the redemption process for the consumption vouchers is also quite complicated and there are no visible signs for participating outlets and attractions. Appealing to different tourists As Hong Kong reopens, many attractions are focusing on different tourists compared with before the pandemic. Gloria Yuen expects the early wave of tourists to be from countries in Southeast Asia, with long haul travel taking longer to recover. She adds that while there has already been a return of tourists from southern China, the time they spend in Hong Kong has reduced, and many now only spend one night in the city, compared with four to five days before the pandemic. The type of traveller coming to Hong Kong has also changed, with Gloria Yuen expecting more independent travellers who book their own excursions through apps, rather than tour groups. Kathy Yuen agrees: “We see the rebound of long-haul visitors being slower. They need more time to plan for a visit and generally want to stay longer.” She adds that the way tourists spend their time in Hong Kong has also changed. “Before the pandemic, they might have focused on shopping, but now they seek experiences and want to explore new and unique things in Hong Kong.” It is one of the reasons why Ngong Ping 360 has launched its new Crystal+ cabin. HKTB’s visitors’ survey found a new demand from visitors to immerse themselves in nature, arts and culture. “To attract high value visitors, HKTB is stepping up promotion of MICE tourism through bidding for and supporting MICE events of various scales, covering a wide range of fields such as finance, innovative technology and medical sciences,” Mak says. It is also working closely with cities in the Greater Bay Area (GBA) to promote multi-destination tourism to external markets under the tagline “Meet Hong Kong, Meet GBA,” as well as encouraging Mainland organizers to host events in Hong Kong to reach out to an international audience. Gloria Yuen says Madame Tussauds started to plan for the recovery in tourist numbers late last year. Measures it has taken include social media promotions and the launch of newwax work figures that visitors can have their photographs taken with, focusing on celebrities fromChina and Malaysia. “We have not done this for three years during the COVID period,” she says. In terms of pricing, Madame Tussauds is now focusing on yield, offering a premium experience to visitors at a higher price, Gloria Yuen explains. Ocean Park is also increasing its promotional activities in its major visitor markets. “We have collaborated with HKTB to host a series of familiarization tours this year for travel trade representatives from the Mainland, Singapore, Malaysia, Thailand, the Philippines, Indonesia, Korea, Japan, and Taiwan,” Chan says. “In addition, we have enhanced our online content and ticketing features, making it convenient for “ Recruitment is a critical challenge as we seek to hire the right people with the necessary skills to deliver a great visitor experience.” 16 April 2023
APLUS individual travellers to book their admission tickets in advance with special promotion packages.” Chan adds that throughout the pandemic, Ocean Park developed new experiences to appeal to local tourists, such as its Starry Summit Glamping programme, which had special Halloween and Christmas versions, its conservation and education experiences, including its Little Meerkat and Giant Tortoise Adventure, and newGet Closer to Animals programmes. Although it has not made any major changes to its pricing structure, Ocean Park has introduced a number of pay-as-you-go experience options and special promotions. Following a government bailout in which Ocean Park received HK$10.6 billion, it has continued with its “rethink” strategy, under which it aims to enhance the visitor experience and amplify its conservation and education focus. “We are taking a proactive approach to managing our financial resources, implementing cost control measures to reduce expenses where possible, optimizing our cash flow management, and exploring new revenue streams to diversify our income sources,” Chan explains. Kathy Yuen says Ngong Ping 360 had not anticipated the border to reopen until July, so had previously allocated most of its budget to local promotions. “We have had to review our budget, as we need to spend money on overseas markets now or we will miss our chance,” she says. She adds that the company is working closely with HKTB to reach tourists in its key visitor markets, such as Thailand. Alongside the introduction of the Crystal+ cabin, it is also investing resources into encouraging visitors to explore Tai O fishing village, and holding workshops for tourists. “We are looking at ways to help visitors experience more of Lantau Island to diversity our revenue sources,” Kathy Yuen explains. In addition, the company has replaced the previous combo ticket for its various attractions with a more flexible pricing structure, allowing visitors to pay for each attraction individually. Talent shortages Despite the increase in tourist numbers, many attractions still face challenges as they look to take advantage of the rebound. HKTB points out that while travel agents, airlines, hotels and other tourism-related sectors are eager to hire new staff, manpower capacity is taking time to recover. “We expect a gradual and orderly recovery of Hong Kong’s tourism industry, while the actual pace will depend on various factors, including manpower shortages, the challenging global economic outlook and intense competition for visitors in the region,” Mak says. The shortage of talent in the tourism sector is an issue for many attractions. “Recruitment is a critical challenge as we seek to hire the right people with the necessary skills to deliver a great visitor experience,” Chan says. Kathy Yuen agrees: “Three years is a long time for a company to keep its business going especially with a significant drop in revenue. Cost saving is, of course, one of the key targets, however, we managed to find savings from other operating expenses and to not implement any lay-off or unpaid leave plans. Management put their hearts into making the health and safety of our staff a top priority. This helped us to retain talent. So far, manpower loss has been from natural turnover, however, it is unavoidable that many tour guides moved to other jobs. We used to rely on freelance tour guides but nowwe don’t have a big pool of people. If more visitors come, we might not be able to find the right people to help us deliver tours.” To address this issue, Ngong Ping 360 is working closely with the Travel Industry Council of Hong Kong and other parties to recruit tour guides back to the sector. Madame Tussauds also faces challenges in this area. “Our biggest headache is recruitment,” Gloria Yuen says. The role of CPAs Kathy Yuen thinks CPAs have an important role to play in helping attractions be flexible and giving advice to management in order to take advantage of the tourism rebound. “As a CPA, you need to think about the business first, and protect the company from any potential loss and optimize costs.” The turbulence of the past three years has brought out the agility of CPAs working in the tourism industry. “As CPAs, we put our focus on cost cutting in all cost lines during the critical pandemic period, and were especially focused on cash flowmanagement in order to survive during the toughest business downturn,” Gloria Yuen says. “For the recovery, we are working closely with management, setting our business strategy by exploring the latest marketing trend and industry data. We are also seeking new opportunities including collaboration with other industry players to maximize our market share post-pandemic.” She adds that CPAs can also work on business proposals that accomplish a decent return, as well as focusing on internal controls. Chan points out that CPAs can assist with financial planning and forecasting for the economic environment, as well as providing insights in areas such as managing cash flow, optimizing revenue streams and controlling costs, and providing guidance on risk management, such as developing contingency plans and diversifying revenue sources. “With the uncertain economy and the pandemic’s impact on the travel industry, this financial planning and forecasting is particularly relevant, as it will enable members in the travel industry to make informed decisions to meet the challenges ahead,” she says. Following the reopening of the border on 6 February, there were 774,890 overnight visitor arrivals in Hong Kong in February this year, compared to 2,372 the year before, according to Hong Kong Tourism Board statistics. April 2023 17
RkJQdWJsaXNoZXIy MTkzNjgzNg==