loss of
Government revenue.
interest tax in 1983-84
The
is
estimated revenue from
million and, although
will be less, it will
$620
indications are that the actual
actual yield will still represent a large sum - say, for example only, about the
cost of the new Polytechnic.
6.
-
Of equal importance is the possible effect which the abolition of this tax might have on revenue from profits tax,
which could have further serious consequences for Government
revenue. Were I to come to the view that interest tax should
be abolished, I should have to introduce measures to protect the profits tax yield and these measures might be draconian and thus unpalatable. One possibility that has been suggested is the imposition of a statutory minimum ratio of equity to debt financing for all businesses, with the consequential
disallowance for profits tax calculation purposes of interest
payments related to debt financing not secured on the assets of the business and falling below the prescribed ratio. Such
a scheme might be broadly feasible, but a great deal of
further thought is required. My mind remains open and I intend to re-address the issue in the context of next year's
budget.
7.
Kong
mainly in
US
dollars
During the first half of this year, foreign currency
deposits
with banks and
deposit-taking companies in Hong Kong rose by 25%, while Hong dollar deposits fell by 3%. July presented a changed
picture, but it is too early
too early to rely on one month's figures
showing renewed growth in Hong Kong dollar deposits. Whereas the rapid growth in foreign currency deposits in 1982 was mainly attributable to the massive shift of these deposits to
Hong Kong from other centres as a result of the removal of interest tax on foreign currency deposits, this adjustment was
probably largely completed by the turn of the year. We must
therefore look to other factors to explain the continued
3
/growth