8
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respect of which tax liabilities are subsequently altered. It is inherent in any situation where taxes are levied that the level, or the incidence, of taxation may change at relatively short notice. Bearing in mind that the present proposal has arisen out of the recommendations of a Review Committee whose report was published well over a year ago, those affected can be said to be, in fact, in a better position than they might normally hope to be when a revenue law is changed in pursuance of budget proposals. And, as I have already stressed, banks and financial institutions have long been in an extremely favourable position vis-a-vis other Hong Kong businesses and, for this reason alone, I can see no justification for any form of transitional relief.
The Bill
22.
Turning now, Sir, to the Bill itself. Clause 2 adds to section 2 of the principal Ordinance definitions of "bank" and "financial institution". These will cover banks licensed under the Banking Ordinance and financial institutions which are carrying on the business of borrowing and lending money, other than banking business within the meaning of the Banking
Ordinance.
23.
Clause 3 of the Bill amends section 15 (1) of the principal Ordinance by providing that, where a bank or other financial institution receives interest which arises directly or indirectly through, or from, the carrying on of its business in Hong Kong, that interest is deemed to be a receipt arising in or derived from Hong Kong from a trade, profession or business in Hong Kong. Consequently, profits from such interest will be chargeable to profits tax. The amended charge will apply even where the moneys in respect of which the interest is received or accrues are made available
outside Hong Kong.
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