The Chinese carrier Liaoning visits Hong Kong

Despite the bad weather and intermittent showers, many Hongkongese were curious enough this Sunday, to take a walk past the HK Disneyland pier to get a better view of the sole Chinese aircraft carrier, the Liaoning.

A photoshoot occasion

With a good dose of propaganda by the Beijing-held SCMP, many locals, photographers and ordinary inhabitants took the 500 m walk to the best position to observe the training ship and snap shots.

While just a training ship, the Liaoning will have at least raised interest from locals and allowed Beijing to put a positive spin on the 20 yrs of the handover of Hong Kong, amidst continuing tensions.

Helsinki: the white city of the North

A recent trip was the occasion of dropping by the Finnish capital, Helsinki. Often unknown, even among Europeans, the other name for Helsinki is “the white city of the North”. The Finnish capital has a vibrant atmosphere and culture which impregnates the whole city.

Helsinki, a city replete with sights

From its iconic Tumiokirkko, to the statue of the three smiths in the center, Helsinki is replete with sights, culture and a lovely architecture. During my visit, they even had a mass choral before Tumiokirkko (see featured photo), with an incredibly blue sky.

Tumikirkko in Helsinki
Tumiokirkko is also known and the Lutheran Cathedral of Helsinki and is one of the landmarks of the gorgeous Finnish capital.

But Helsinki has something else that makes it even more lovable. For being a Nordic capital, it has a truly laid back culture and inhabitants seem keen on enjoying life as, for example, enjoying cafes even when it is as cold as 12° C outside.

By 12° C, Finns are enjoying a drink in the harbour of Helsinki.

 

The impressive Finnish culture

When visiting Finland one must also pay attention to their impressive culture, and in particular their main work developed in the XIXth century, namely the Kalevala. An epic poem written by Elias Lönnrot after collecting oral tradition from the region of Karelia, the Kalevala is still very much at the foundation of the Finnish national spirit.

A copy of the Kalevala in front of the statue of Elias Lönnrot in Helsinki.

In a somewhat ironic twist of history, nowadays, Russians are trying to surf on the Kalevala myths and history for tourism, as the greater part of Eastern Karelia has been occupied by Russia during WW II. Still, the Kalevala is very much a Finnish work and only Finns can truly talk about it in full knowledge.

Culture is very important for Finns. Look at this library, for example, and the number of philosophical works translated into Finnish.

A must see museum!

Finally, if you have the time (and make it if you don’t have it), go and visit the marvelous little museum of Sinebrychoff, which boasts a small, but exquisite collection of classical European art. They even boast a Rembrandt in their collection!

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The midnight sun

In summer, finally, an unforgettable experience is to wake up at 3 AM and go and see the midnight sun on Helsinki’s harbor. See below for an idea of what it is like.

How to go there? Well, the obvious answer would be to catch the Finnair flights which take you there from any corner of the world and enjoy as well the Finnish welcome as soon as you board the aircraft. Otherwise, plenty of solutions are available to go to Helsinki from Europe (even a week-end or a day trip is largely worth it).

 

The plight of elephants in Thailand

A long silence finally broken

After a long persisting silence, finally a study was carried out on the mistreatment of elephants in Thailand.

While many tourists love to ride elephants as an attraction (the main place for this being the Elephant kraal in Ayutthaya), few know that to get pliable animals who accept to let someone ride on their back, the baby elephants must go through real torture.

Abuse is rife and would lead to international outcry if it happened in Europe or in any Western country. Because Thailand is a third world country and because tourism is such a huge industry worth millions of dollars, nobody told the Thais it was a shame on their country. Until today that is.

Thailand today: a monk, a smartphone and a flag

A man taking a picture of the sunset on his smartphone with a Thai flag blowing in the wind. Nothing unusual, except that man is a Buddhist monk holding a smartphone when he should not be owning anything according to the precepts of Buddhism.

A visual summary of Thailand

In a way, this picture summarizes everything about Thailand . One picture uniting a monk, a smartphone, a Thai flag, the Chao Phraya and the sunset.

Monks and smartphones have become a common sight in Bangkok nowadays, with several of them roving IT shops like Panthip Plaza or MBK, looking for the latest gadgets. This and several scandals rocking the Buddhist institutions have given way to a serious feeling of tiredness with monks in Thailand.

Nevertheless, to invite us to relax and let things go the Thai style (“Jai yen yen“), this cat tells us “mai pen rai, just let them be and take a nap”.

A cat takes a nap at Mahathat galleries on the Chao Phraya.

 

 

The influence of China on Hong Kong from an unexpected angle: taxation

Hong Kong has a worldwide reputation for being a semi tax heaven.  This reputation hangs mainly on the concept of territoriality for taxes, which in turn gave birth to the very interesting concept of the “offshore status”.

More can be learned (from a very technical point of view) by reading the Departmental Interpretation and Practice Note 21 (DIPN 21) of the Inland Revenue Department (IRD).



Basically, what this says, in layman terms, is that if a company does not have elements localizing the profit generation in Hong Kong, then it not liable to pay taxes in Hong Kong. When considering “profit generation”, the IRD generally looks at things like negotiating contracts, taking orders, shipping goods etc.

This is one of the aspects that has been used not so much by multinational companies, but rather by SME’s and (very) wealthy foreigners attempting to evade taxes in their own jurisdiction.

Growing restrictions

In recent years, and under the growing pressure of the OECD’s BEPS initiative (Base Erosion and Profit Shifting) however, the IRD has sensibly tightened the noose around the offshore claim, through various aspects.

One example of this growing restriction is a recent decision of the Board of Review of the IRD.  This decision rejected an appeal by the taxpayer based on the fact that the taxpayer, besides supplying metals from Taiwan to Japan, did as little in Hong Kong as merely presenting letters of credit to the bank. Obviously, in this case, there was factoring and an element of financing in Hong Kong, but it was quite limited. So far, we could merely say that such pressures are linked to the desire of Hong Kong of not being blacklisted as a tax heaven, but concerns with regards to China are also apparent, as a lot of the IRD practice focuses on operations where manufacturing was carried out in China out of offices in HK.

The issue of residence

In 2015, another move took place which is more important and enlightens the growing influence of China.

This involves international treaties aiming to the prevention of double taxation (often just shortened to double tax treaty). In such bilateral agreements between states, a more favorable withholding tax (WHT) rate is granted to individuals or companies residents of one state which receive revenues from the other state, compared to the national withholding rate. This is important, for example, if revenues from dividends are received.

Where a Hong Kong resident company might be paying 30 % withholding tax in the USA if it receives dividends paid from the USA, on the contrary a Swiss resident company could be totally exempt of US withholding tax. This mechanism allows to reduce significantly the burden of cross-taxation across countries and aims at favoring cross-border investment.

Between China and Hong Kong (for the purpose of international tax matters, Hong Kong is almost considered as a State, but it is China that signs the treaties on its behalf), there is a double tax treaty. The Treaty WHT of China is 10%, but it can further be reduced to 5% if the Hong Kong company displays sufficient “substance”.

The concept of substance is mainly an element of fact, but the tax authorities look mainly for sufficient decision-making elements in the country of incorporation. The Dutch criteria for substance provide an an example of what can be required. Normally, the country remitting the dividends examines this issue (in this case, China). The  Hong Kong IRD introduced another unusual twist to this in 2015.

2015: crackdown on HK’s companies

In 2015, out of the blue, the IRD decided to implement a sudden change in its requirements to issue a “Tax Residency Certificate” (TRC). In fact, even when having a double tax treaty with Hong Kong, some countries might ask for such a document which is delivered by the local tax authorities of the country of incorporation of a company.

All of a sudden, the form for issuing a TRC became more stringent and contained detailed questions on the operations of a company. From various reports, it appears that the IRD does now carry out detailed checks on the substance of companies in HK and its “beneficial ownership” of the revenues.

The real reason for the change: Chinese pressure

Where the details become interesting, is that according to local tax advisors, this sudden change was carried out at the demand of China’s authorities. In fact, Hong Kong has often served as a pathway for wealthy Chinese to exfilter wealth from China. With the issues of capital flight worrying the Chinese government, they immediately took aim at Hong Kong, where shell companies have been numerous as previously alluded at the beginning of this article.

Where Hong Kong has had a large autonomy, especially in taxation matters, it is clear that this is changing as on several other points. China is going to make its might be felt where and when it feels it needs to inflex the policies of its “Special Administrative Region”.  From the “gateway to China” as it was perceived, Hong Kong is now increasingly moving to be felt as a threat to China.

While the issue of tax residency may seem secondary and affecting only a minority of wealthy individuals, it is symptomatic of the new shortened leash which the Chinese masters continue to yank around the neck of Hong Kong.

 

The Cardboard ladies of Hong Kong

A lady collecting cardboard for a living is seen in Mongkok.

In Hong Kong, there are  a lot of elderly people who try to make ends meet by collecting and selling cardboard to recycling companies, commonly called the “cardboard ladies”. A feature was made on them in the South China Morning Post in 2014.

Recent Developments

Recently, the plight of the cardboard ladies made the headlines when an old lady got arrested by the HK authorities for reselling cardboard at 1 HKD. The old lady got charged by the  Food and Environment agency of Hong Kong with unlicensed hawking and obstruction of public places. She was released on a bail of 30 HKD. This bail may seem very low, but it left her with only 34 HKD in her pocket!

This brought around an outcry of the public and eventually, the department agreed to drop the charges against the old lady. This served however as a revealer of the huge economic divide in Hong Kong.

The cardboard ladies, illustration of a huge economic divide

While Hong Kong is generally seen as a prosperous city, the prosperity has not reached every class of the population. There are people who are still economically struggling, especially in the low income classes. When they reach retirement, cost of living and cost of housing take their toll.

The “cardboard ladies” are just one example stressing how the city is becoming increasingly unlivable.

Update on 14/07/2017: Bloomberg published an article on the Cardboard ladies : https://www.bloomberg.com/news/articles/2017-07-12/china-s-property-boom-passes-by-migrants-to-hong-kong

You can watch their video below:

https://www.bloomberg.com/news/videos/2017-07-12/the-tough-lives-of-hong-kong-s-cardboard-collectors-video