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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):


     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?



     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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