Hong Kong Towards a Leading Global FinTech Hub

50 51 Business Environment Part I: Examination of Seven Fintech Hubs Country (Selected Hub) Switzerland (Zurich) Singapore United Kingdom (London) United States (New York & San Francisco) Japan (Tokyo) China (Shanghai) Index Global Innovation Index 2020 1/131 8/131 4/131 3/131 16/131 14/131 International Property Rights Index 2020 2/129 3/129 18/129 13/129 5/129 49/129 Ease of Doing Business Index 2020 36/190 2/190 11/190 6/190 29/190 31/190 Corruption Perceptions Index 2020 3/180 3/180 11/180 25/180 19/180 78/180 Financial Secrecy Index 2020 3/133 5/133 12/133 2/133 7/133 25/133 Tax as % of GDP (Base year 2019) 10.2% 13.3% 25.3% 10% 11.3% 11.2% Source: (1) Global Innovation Index 2020, Source: WIPO, 2020, 131 economies surveyed (2) International Property Rights Index 2020, Source: (Property Rights Alliance, IPRI, 2020), 129 economies surveyed (3) Ease of Doing Business Index 2020, Source: World Bank Group, Doing Business 2020), 190 economies surveyed (4) Corruption Perceptions Index 2020, Source: Transparency Int., 2020, 180 economies surveyed (5) Financial Secrecy Index, Source: Tax Justice Network, 2020, 133 economies surveyed (6) Tax as % of GDP 2019, Source: (World Bank, Tax revenue (% of GDP) 2019; CEIC, Tax Revenue: % of GDP) [ Exhibit 15 ] : Rankings on Business Environments on Global Indexes of the Selected Hubs London: Well-Respected Legal System and Mature Ecosystem The UK has established itself as the center of European fintech investment, with mature investment activities across the entire fintech lifecycle from seed funding to M&A. In 2019, the UK fintech sector generated an estimated revenue of £11bn (US$15.5bn), up from £6.6bn (US$9.3bn) in 2015. 136 It employs around 60,000 people up and down the UK, where London is a global hub to more than 20 fintech accelerators. 137 London-based companies accounted for half of the 10 largest European investments recorded in 2019. The city attracted 114 investments with a record-breaking value of more than £1.6bn (US$2.3bn) in the first eight months alone. 138 In 2020, London attracted £4.1bn (US$5.7bn) VC and ranked second globally, just behind the US. 139 Companies may have to anticipate a higher business cost for setting up in the UK, but its strong reputation for the rule of law and high standard of regulation are attractive to both MNCs and startups. The English and Welsh Common Law is the most widely used legal system, which covers almost one third of the world’s jurisdictions and has established a unique advantage in providing legal services to businesses internationally. Being a leader in fintech regulation, the UK develops and exports related policies to other jurisdictions, sets good examples, and upholds the standard internationally. Additionally, the UK has one of the lowest average corporation tax rates in the G20 economies, the joint lowest statutory corporate tax rate (19%) of the G7, and one of the world’s largest double tax treaty networks. 140 The UK government does not conduct fintech-specific tax-related programs, but fintech startups are covered under existing schemes. Some examples are the Seed Enterprise Investment Scheme (SEIS), and the Enterprise Investment Scheme (EIS). In addition, it set up several tax cutting regimes such as (1) Social Investment Tax Relief (SITR); (2) Venture Capital Trust (VCT); (3) Entrepreneur’s Relief; and (4) Investor’s Relief, to help businesses reduce capital gains taxes, thus helping to attract more investment to the country. UK firms can benefit from a capital gains tax cut up to 50%, with a £1.2mn (US$1.69mn) upper limit. 141 The UK government has other innovation-related tax reduction schemes as well, including: (1) a patent box regime; (2) a 10% income tax deduction on patent gains; and (3) R&D tax credits to encourage R&D expenditure. 142 136. Department of International Trade. | UK Fintech – State of Nation (Apr 2019). | https://assets.publishing.service . gov.uk/government/uploads/system/uploads/attachment_data/file/801277/UK-fintech-state-of-the-nation. pdf 137. Findexable. | Findexable Global Fintech Rankings 2020 (2019). | https://findexable.com/wp-content/ uploads/2019/12/Findexable_Global-Fintech-Rankings- 2020exSFA.pdf 138. Warrington, J. | London overtakes New York to steal global fintech investment crown (Sept 2019). | https://www. cityam.com/london-overtakes-new-york-to-steal-global-fintech-investment-crown/ 139. England, J. | UK ranked second to US for fintech capital funding in 2020 (Jan 2021). | https://www. fintechmagazine.com/financial-services-finserv/uk-ranked-second-us-fintech-capital-funding-2020 140. City of London. | The Global City (2021). | https://www.theglobalcity.uk/the-uk-offer/business-environment 141. HM Revenue & Customs. | Use a venture capital scheme to raise money for your company (Sep 2018). | https:// www.gov.uk/guidance/venture-capital-schemes-raise-money-by-offering-tax-reliefs-to-investors 142. TWP Accounting. | R&D (Research and Development) Tax Credits and the Patent Box Tax Relief (Apr 2019). | https:// www.twpaccounting.co.uk/blogs/rd-research-and-development-tax-credits-and-the-patent-box-tax-relief/