Following the recent release by the newly launched Deloitte Asia Pacific International Core of Excellence (AP ICE) of a survey singing the jurisdiction's praises in terms of its tax regime, Hong Kong has also been singled out as a leading location for small businesses in the Asia Pacific region.

According to a report from the Xinhua news service, keynote speaker at the CLSA (Credit Lyonnais Securities Asia) Investors Forum, and chairman of institutional investor, the Wharf Group, Peter Woo Kwong-ching stressed that despite China's World Trade Organization membership, Hong Kong is not in any danger of being bypassed by SMEs, due to "location, strong institutions including the rule of law, a transparent and low-rate tax system, (and) the free flow of information, people, capital and merchandise".

The Wharf Group chief also reportedly told the institutional investors attending the Forum that SMEs comprise the vast majority of Hong Kong's companies (with the number of such operations from the United States, Japan, Australia and Europe increasing over the past couple of years by 33%, 44%, 55% and 23% respectively) and suggested that they have the ability, due to their flexibility, experience and expertise, and agility, to both act as a conduit for business from China, and to sell to the Chinese.

Meanwhile, Deloitte's AP ICE, launched in early June to provide international tax consulting services to Asia Pacific based companies investing abroad as well as multinational companies investing in Asia Pacific, has released its first Asia Pacific Tax Complexity Forecast, which surveyed over 1,000 financial and tax professionals within the region.

According to Deloitte:

"The report seeks to provide a benchmarking tool for business to compare their perceptions of and responses to the current and anticipated tax environments across the region and provide some general guidelines to facilitate business decisions and tax management practice."

Although the poll found that business opportunity was a more important consideration than tax complexity when choosing a location to establish in, around 55% of respondents indicated that their companies had in the past exited or postponed entry to markets because of their concerns about tax complexity and consistency.

"The responses reflect generally an alignment between the priority tax locations and the underlying macroeconomic trends. Japan, Singapore and Hong Kong are among the other top five priority locations. In our experience, these top five priority jurisdictions reflect both a business focus on market potential as well as operation organization to optimize tax planning,” observed Alan Tsoi, Deloitte AP ICE Co-Leader.

He continued:

"There are also distinct roles played by different jurisdictions in the region, for instance, Australia and Indonesia represent priority tax management areas for energy and resource companies, while Hong Kong and Singapore continue to be popular locations for the financial service industry and for certain regional business functions."

Whilst China, India, Japan, South Korea and Australia claimed the top spots in terms of perceived tax complexity over the coming three years amongst those questioned, Hong Kong and Singapore were seen as likely to have the least complex tax environments in the period to 2013.

In terms of consistency and predictability with regard to tax matters, China and India were perceived by the survey participants as less consistent in enforcing tax law, while Singapore, Hong Kong and Australia were considered to have more consistent tax policies and enforcement. Hong Kong and Singapore were also thought to have the most predictable tax environments, followed by Japan, South Korea, Taiwan and Australia.

"Given the divergence in tax complexity, consistency and predictability among jurisdictions in the region, it is important for companies to consider the appropriate combination for their business of in-house and outsourced resources and the choice of location of certain business functions. In response to the aggressiveness in tax audits in some fastest growing markets, companies should pay close attention and devote more resources to mitigate future tax exposure. To manage unpredictability, tax professionals should not underestimate the value of their experience in helping to watch for signals and the likely path of change and enforcement,” Lili Zheng, AP ICE Co-Leader, concluded.