For KK So, one of the most memorable moments of his career is turning up to sit his Chartered Accountant of Australia exam in Melbourne with a milk crate full of books.
While many accountants describe obtaining their professional qualification as the hardest thing they have ever done, So, Partner, Tax Services, and Asia Pacific Real Estate Tax Leader at PwC Hong Kong, actually did it twice.
He took the Hong Kong Institute of CPAs’ Joint Examination after graduating, and admits he found it really tough. When, a couple of years later, he transferred to Australia, he decided he needed to be qualified there too and signed up for the Accounting Professional Year Programme. “When I first enrolled one of my seniors said, ‘Oh KK, are you serious about this? It is very difficult,’” So remembers. But he pointed out that he had already managed to survive Hong Kong’s very tough exam.
“Back in those days in Hong Kong you needed to take four subjects on four consecutive days, and you needed to pass all four subjects in one go. Unlike Hong Kong, Australia was an open book exam. It had its own difficulty, but you didn’t need to memorize all the stuff,” he says.
In any case, So decided that as he had to study tax law in Australia for his work anyway, he might as well just enrol himself in the programme. Looking back, he says taking the exam was worth the effort. “The long and the short was that I survived. It helped me to establish myself in Australia, as I really needed to understand the local rules and local way of doing things. As a newcomer to Australia it was also a good occasion for me to make friends. It helped me become part of the local system,” he says.
KK So (centre) with the interviewees of the special report on corporate tax, (from left) Sharon To and Eugene Yeung, and (from right) Doris Chik, Cynthia Lam and Benjamin Chan.
An intellectual challenge
So joined Price Waterhouse, which later became PwC, immediately after graduating from the Chinese University of Hong Kong with a degree in business administration majoring in accounting. He had the choice of becoming an auditor or going into tax, and he chose the latter. “Tax was more appealing to me. I had studied it when I was at university and had found the subject very interesting. It is part accounting and part legal, and I found it very intellectually challenging.”
So adds that it was an unusual choice for a fresh graduate at the time, and there were not many positions available for tax practitioners at the start of their career. A lot of people also tried to persuade him to go into auditing instead, but he was guided by his interest in tax. “I am one of the very first generation to jump right into tax after graduation, with the possible exception of people who joined the government. Back then, it was very rare,” So says.
He has never regretted his choice. “I have had a very colourful and exciting career. When I look back over the last 30 odd years, there is no lack of memorable events. I have a lot of fond memories,” he says.
In 1989, four years after graduating, So was offered the opportunity to transfer to PwC’s office in Melbourne. “I was born in Hong Kong and educated here and I’m from a very local family, so I never dreamed I would have the opportunity to go overseas.”
While So says he treasured the experience, he concedes that to describe it as being “a little bumpy” in the beginning would be an understatement due to the fact he had to learn about the local tax system from scratch. “The experience helped me a lot in terms of my career development as it exposed me to a totally different tax regime that was much more complex than the Hong Kong regime. I dealt with a lot of issues that I wouldn’t have come across if I had stayed in Hong Kong,” he says.
He also enjoyed the culture and working with different industries and clients. He had no firm plans to return to Hong Kong, but during a visit to the city after attending an international tax conference in Macau, he met his former bosses and they asked him if he would consider transferring back. “I struggled to decide, but the way I saw it, there were a lot of opportunities in this part of the world,” he says. So returned to work at PwC in Hong Kong and in 1996, he made partner.
Tangible assets
A couple of years after being made a partner, So took the decision to specialize in real estate tax, initially taking the lead for the real estate practice in Hong Kong, and later looking after Asia Pacific. Specializing in this area appealed to him because of the capital-intensive nature of the business, and the fact that real estate is a tangible asset. “I can still remember the first significant real estate transaction I participated in. It was a development in the Admiralty area, and the building is still standing, pretty much the same as it was around 30 years ago. It is a very nice building,” he says.
He has also participated in a number of major development projects, including some of those forming part of the Hong Kong Port and Airport Development Strategy, which involved the construction of the Airport Express Service, among other things. “Whenever I pass by those areas and see the developments, it reminds me of my involvement. In a sense, I have witnessed the economic development of Hong Kong over the years. That is the interesting thing about real estate. It is so real, you can see it, touch it and use it. It is exciting.”
“Whenever I pass by those areas and see the developments, it reminds me of my involvement. In a sense, I have witnessed the economic development of Hong Kong over the years.”
So points out that there are also many different types of tax that apply to real estate, including stamp duty, while different jurisdictions also offer tax enhanced structures for the sector, such as real estate investment trusts. “It is more complicated because of the different types of tax that might apply. It makes it very challenging and increases the scope for taxation services,” he says.
A large part of So’s day-to-day work involves assisting real estate fund managers launch new funds. “They could be pan-Asia funds covering a few Asian territories, such as Japan, Korea, Singapore, Australia and China. They typically approach international investors and we need to consider the tax implications for these investors as well, looking at how to structure the investment in different locations,” he says.
One of the issues currently keeping So occupied is Hong Kong’s proposed vacancy tax, under which developers will have to pay a tax equivalent to two years’ rental income on newly completed flats that remain empty for more than six months. “We are working with lawyers to explain the bill to our clients and help them understand the implications,” he says. He adds that they are also providing feedback to the government on the new tax.
KK So specializes in real estate and asset management. He expects tax practitioners to become more specialized in future.
Increasing complexity
In the time he has been working in corporate tax, So has seen the field has become increasingly complex. As a result, accountants working in the area are having to become more specialized, with some practitioners focusing on areas such as transfer pricing, research and development, mergers and acquisitions, etc.
He adds that people are also specializing in specific industries, such as himself in real estate and asset management, while he has colleagues who cover start-ups, consumer products, etc. “It is our response to the requirements of businesses in the market because their business models are getting so complicated these days, and clients expect us to understand them,” he says.
He expects tax practitioners to become more and more specialized, although he thinks generalists will continue to exist, likening the situation to medicine. “In medicine, there are still general practitioners but at the same time there are a lot of specialists taking care of your heart, liver, or doing surgery.
“Likewise, in taxation we have witnessed this sort of specializing happening as business is getting more complicated and tax laws keep changing. I think the momentum will carry on, but there are still businesses out there that create demand for general practitioners as well. There are different segments that allow both generalists and specialists to prosper,” he says.
Technology has also had a big impact on the field. So jokes that when he first joined the profession, he spent a lot of time doing footing and casting. “We still used pen and paper and when we had written something, we would pass our script to the typing pool,” he remembers.
“In the old days, taxation was not a topic you would expect in the boardroom, but these days it will come up again and again because companies are concerned about their reputation.”
He adds that when he was doing international tax and had to communicate with people in the Netherlands or Luxembourg, he would do so by telex, as it was before fax machines were widely used. “These days we are talking about the extent to which artificial intelligence can do the day-to-day enquiries and more routine work. We have cloud computing and email. In a split second you can get a response from anywhere,” he says.
Another change So has seen is the increasing ethical dimension tax practitioners have to factor into their work, as a result of developments in international tax law and a growing focus on corporate social responsibility. “In the old days, taxation was not a topic you would expect in the boardroom, but these days it will come up again and again because companies are concerned about their reputation.”
He points out that – as several multinational companies have experienced – even when complying with the law, companies can still suffer reputational damage if the public thinks they are not paying a fair amount of tax. “Back in the old days, there was a period when a lot of people were selling tax products, these days it is entirely out of fashion and companies are mindful of tax planning ideas which may be perceived to be too aggressive,” he says. “It is difficult, particularly coupled with the fact that in recent years there has been a global effort to combat tax avoidance activities and we have seen new rules and laws being introduced almost everywhere.”
So graduated from the Chinese University of Hong Kong with an MBA and a degree in business administration majoring in accounting.
A bridge between stakeholders
The growing complexity of international tax law has also affected him in his other role as Chairman of the Institute’s Taxation Faculty Executive Committee. The Taxation Faculty not only aims to support Institute members working in the field, but also to act as a bridge with other stakeholders, including businesses, the Inland Revenue Department and other government departments, including the Financial Secretary’s Office and the Financial Services and the Treasury Bureau.
So has had a busy few years in his post as Hong Kong has responded to international tax developments, including the Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) initiative. The Taxation Faculty reviews all amendment tax bills, collects comments from the business community and the industry, and provides feedback to the government. “We spend a lot of time following all of these developments, which may pop up every month or every week. It is very challenging, and I think it explains why we are stepping towards even more specialization. Tax law is getting so complicated,” he says.
One of the biggest issues the Taxation Faculty has handled during So’s tenure has been the transfer pricing law the government introduced as a response to the OECD’s BEPS initiative. “It was a big piece of legislation. It was almost thicker than the existing tax law, just for the bill itself. You can imagine what an enormous exercise it was.”
The proposed bill was controversial to many because it went beyond the level both required and expected. “We gathered the views from the profession. A lot of people made a contribution, and we channelled those views to the government. We went all the way to the Legislative Council to engage in conversation, alongside making a written submission. “As a result, the law has changed a lot since the inception of the discussion of the bill. That is the sort of result the profession has achieved for the industry. It is really an attempt to optimize the tax system.”
He adds that even after a law has been introduced, the Taxation Faculty continues to be involved, organizing seminars in which tax practitioners share their insights, and helping to educate the tax community and other stakeholders on the impact of the new law.
Child-like curiosity
For anyone who wants to go into corporate tax, So thinks a strong interest in the area is key. “When you are interested in something it isn’t a burden for you to spend time pursuing knowledge in that area.”
He also thinks they need to have the curiosity of a child. “Whenever there is something new you need to be so curious about it and want to know more. That is very important as tax law keeps changing and business keeps changing, so if you don’t have this sort of drive to discover new things and learn new skills, you will soon be outdated.”
So adds that people will also need a good mind for detail and a strong business sense. “Taxation is a very interesting discipline in that just knowing the accounting rules or legal rules is not enough. It is a combination of those and business knowledge.”
He points out that it is also important to have the empathy to understand what the other side is experiencing and what their pain point is, so that you can help them address their problem. “Our technical knowledge and analytical ability are the tools, but it is in the course of interacting with people that you create the value for your client,” he says.
When So is not working, he has a number of hobbies that keep him busy. “I enjoy sport. I am a distance runner. I run 10Ks and half-marathons, and I am hoping to do a marathon in due course. I also play golf,” he says.
In addition, he is a keen musician and loves to both play and listen to music. “I play classical guitar, and I am picking up a little bit of piano. I used to play the Chinese flute but no longer. I don’t play well but more importantly, I enjoy it.” So adds: “I also love wine and good food and the company of a bunch of good friends. That is what wine and good food are for.”
KK So is Chairman of the Institute’s Taxation Faculty Executive Committee. The Taxation Faculty organizes different tax activities and programmes, raising the profile of the taxation profession in Hong Kong.
