Replies to LegCo questions
LCQ5: Fees of hawker licences and rents of wholesale food market
Following is a question by the Hon Vincent Fang Kang and a reply by the
Secretary for Food and Health, Dr York Chow, in the Legislative Council today
(May 9):
Question:
Recently, I have received requests for assistance from quite a number of
grassroots trades which indicated that they could not benefit from the measures
introduced by the Government in 2012-2013 to support enterprises. Among them,
the hawkers cannot benefit from the waiver of business registration fees since
they pay hawker licence fees (licence fees) instead of business registration
fees. In addition, the wholesalers operating in the two wholesale food markets
(food markets) under the Agriculture, Fisheries and Conservation Department (AFCD)
have pointed out that AFCD, after substantially increasing the rentals by 11.4%
in 2008, substantially increased the rentals again by about 8% this year.
Although these two trades have requested that the Government's support measures
should benefit them, the Government has responded by referring to "cost
recovery" and "user pays". The relevant groups submit that the Government is
discriminating against grassroots trades. In this connection, will the
Government inform this Council:
(a) whether all the traders which have completed business registration
procedures may benefit from the waiver of business registration fees; given that
the Financial Secretary has indicated that the waiver of business registration
fees will reduce the Government's revenue by $1.9 billion in this financial
year, whether that figure is the net revenue after deducting the administrative
expenses of the government departments concerned; of the current number of
government personnel responsible for business registration and the annual
expenditure; whether these departments will have deficits in this financial year
with the reduction of $1.9 billion in revenue; the average cost of handling a
case of business registration at present, and whether the current fee can
recover the cost;
(b) of the number of hawkers (including fixed-pitch hawkers and itinerant
hawkers) who need to pay licence fees at present; the method for calculating
licence fees and the revenue from licence fees last year; whether there were
hawkers who failed to pay licence fees or did not pay the fees on time in the
past three years; if there were, whether they were penalised; whether there is
room for waiving or reducing licence fees in 2012-2013; if there is, of the
reasons; if not, the reasons for that; and
(c) given that the rentals for public markets have been continuously frozen for
quite a number of years, but the rentals for food markets were substantially
increased twice within four years, why the Government adopts different attitudes
when managing these two kinds of markets, and of the details of the current
mechanism for adjusting rentals for food markets; whether the operation of the
food markets has achieved fiscal balance at present, and list the major
expenditure items for the two food markets last year and whether there is room
for reducing expenditure; whether the authorities will discuss with the traders
the strengthening of cooperation to reduce the management costs of the food
markets, so as to avoid shifting the increased costs to them?
Reply:
President,
All along, both the fees of hawker licences issued by the Food and Environmental
Hygiene Department (FEHD) as well as the rents of the Cheung Sha Wan Wholesale
Food Market (CSWWFM) and the Western Wholesale Food Market (WWFM) under the
Agriculture, Fisheries and Conservation Department (AFCD) are determined on a
"cost recovery" basis.
The purpose of hawker licensing is to regulate hawking activities. The nature of
a hawker licence is similar to that of a licence or permit for certain types of
business, such as karaoke establishment permit, restaurant licence and amusement
game centre licence. On the other hand, the main purposes of business
registration are to provide the Inland Revenue Department (IRD) with information
on businesses to enable IRD to create tax files and the public to inspect for
reference. Business registration is not for regulating business activities, nor
equivalent to a licence for trading. As such, the hawker licence fee should not
be compared to the business registration fee.
Since the commissioning of CSWWFM and WWFM in 1993 and 1994 respectively, the
rents of these two wholesale markets have been charged by the Government on a
full cost recovery basis. The rents are reviewed every two years after
completion of a full costing exercise. Based on the outcome of the review, the
rents are adjusted either upward or downward biennially. In fact, during the
past 12 years, the rents of these two wholesale markets have been reduced or
have remained unchanged on several occasions in accordance with the mechanism.
The items taken into account by the Government in the computation of the rents
of these two wholesale markets on a full cost recovery basis include
departmental staff costs and expenses (including electricity charges, charges
relating to hiring of cleansing and security services, as well as other hiring
charges), depreciation of buildings and equipment, rates, cost of services
provided by other government departments and central administrative overhead.
My reply to the various parts of the question is as follows:
(a) The Financial Services and Treasury Bureau points out that a series of
measures have been announced in the Budget for the financial year of 2012-13 to
help enterprises reduce their operating cost, including waiving the business
registration fees for 2012-13. As stated in the Budget, we estimate that the
measure of waiving the business registration fees will reduce the Government's
revenue by $1.9 billion. Such estimation only covers the revenue foregone
arising from the waiver of business registration fees and is not inclusive of
any administrative costs.
The level of business registration fee is not linked to the cost of providing
that services. The enforcement of the Business Registration Ordinance (Cap. 310)
is undertaken by the Business Registration Office (BRO) of IRD. Currently, there
are 70 staff members in BRO. Its total expenditure in the financial year of
2011-12 was about $60 million, which was met as part of the general operating
expenditure of the Government.
(b) As I have just mentioned, the hawker licence fee is determined on a "cost
recovery" basis, i.e. the Government should recover the costs of regulating
hawking activities. Currently, the Government has no plan to waive the hawker
licence fee.
As at March 31, this year, there were a total of 6 894 licensed fixed-pitch
hawkers and itinerant hawkers. The revenue from hawker licence fee was about $14
million in 2011-12.
Licensed hawkers are required to renew their licences every year before the
expiry date and relevant fees will be charged. Late application for renewal is
subject to the approval of FEHD. Over the past three years (i.e. 2009 to 2011),
155 late applications were approved. As to whether these late applications
involved non-payment or late payment of licence fees, FEHD has not kept any such
information. No surcharge will be imposed on the licensees for late application
for renewal. However, any hawker who operates without a valid hawker licence
will be prosecuted.
(c) The rents of public markets and wholesale markets cannot be compared
directly. Regarding the rents of public markets, the Administration put forward
two proposals on the rental adjustment mechanism in 2009 and 2010 respectively.
Under these proposals, rents would be set at the levels of either the open
market rental or actual average rental of market stalls, instead of being
charged on a full cost recovery basis. At present, we are still in discussion
with the trade and the Legislative Council on the issue. Given the different
backgrounds and historical developments of wholesale markets and public markets,
a direct comparison of their rental adjustment mechanisms should not be drawn
without regard to the context.
We have recently completed a costing exercise for CSWWFM and WWFM. The exercise
indicates that the cost has increased by 8.04%. In line with the established
arrangement, the costing has already excluded those costs related to the
measures to improve public order and public health. The increase in the
operating cost of the two wholesale markets is mainly due to the upward movement
in costs relating to cleansing and security services (excluding installation of
closed circuit television) by 9.1%. Major expenditure items of the two wholesale
markets in 2011-12 are set out in the table at Annex for Members' reference.
There are more than 840 units in CSWWFM and WWFM. Upon the rental adjustment of
the two wholesale markets for 2012 to 2014, the monthly rent of most standard
stalls (34.5 square metres) will increase by $320, from $4,000 to $4,320, under
the established mechanism. Depending on the size of the stalls, the actual
rental increases will range from $200 to $2,250 per month. The increase in
monthly rent of most parking spaces in the car parks is less than $100.
The rental adjustment mechanism of these two wholesale markets is transparent
and has been in operation for nearly two decades. It is important for us to
maintain the integrity of the mechanism and adhere to the underlying full cost
recovery principle. Nevertheless, taking into account the recent rental increase
under the mechanism and the operating difficulties faced by the wholesale food
industry this year as indicated by the tenants of CSWWFM and WWFM, we decided in
mid-April this year that during the two-year tenancy period from 2012 to 2014, a
one-month rental waiver would be provided to the existing tenants of CSWWFM and
WWFM. The new rent will take effect from May 1, 2012.
AFCD will continue to maintain liaison with the tenants of wholesale markets in
exploring the feasibility of further enhancing the operational efficiency of
wholesale food markets and reducing their operating costs.
Thank you, Mr President.
Ends/Wednesday, May 9, 2012
Issued at HKT 15:02
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Annex