Reference....
CONFIDENTIAL
Mr Stuart Minute Mr Male. Spoken
F/A Des
HONG KONG TAXATION YIELD
1.
9/10
You asked for an estimate of what the yield would be if the rate of direct taxation in Hong Kong were to be increased from the present rate of a flat 15% to one of 25%.
2. The table below is taken from a recent issue of the Far Eastern Economic Review and is useful as it provides a breakdown under the first section of the 5 sources of income which are at present subject to direct tax. The figures relate to the year 1973/74 and show a total revenue under these heads of HK$ 1,680 million (about £ 142 million) in round figures.
TUM
J
Goven ment
revenue 1973/74
(HK$ millions)
Internal Revenue
Profits tax
Corporations.
.923.8
Unincorporated businesses.
230.9
.Salaries tax
283.2
Interest tax.
75.2
Property tax.
141.1
Personal assessment.
25.5
Total earnings and profits tax: _1,679.8
Estate duty..
50.1
Stamp duty
462.6
Betting duty_
62.1
Other internal revenue.
14.7
Total internal revenue,
2,269.3
Other major revenue items
Duties.
454
Rates
354
Land sales.
.367
Property and investment income.
.383
Licences and franchises
238
Fees
250
Total Government revenue
5,276
3.
The receipts from direct taxation account for about 31% of all government revenue. For 1974/75, the income from direct taxation is estimated at HKS 1,715 million (about £ 145 million). On the data available in the department it is not possible to arrive at a breakdown of this figure similar to that given in the table above, but if the total is taken as the basis for the calculation it will be seen that tax at the rate of 25% would give a yield of HK$ 2,859 million (approximately £ 242 million).
4. As you know, the Hong Kong dollar is tied to the US dollar, which of course fluctuates vis-à-vis the pound sterling, but for the purpose of the calculations in this minute I have taken the rate of HKS 11.80 to the £.
1 October 1974
K Hanna
Hong Kong & Indian Ocean Dept
CONFIDENTIAL