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I said that I had two measures to announce. The second is this. As from Monday, 17 October interest on Hong Kong dollar deposits with financial institutions will no longer be taxed. This means that there will no longer be a tax advantage in holding foreign currency deposits or in holding Hong Kong dollar deposits offshore.
As I said last month, the government must take account of the possible erosion of profits tax revenue arising from the removal of interest tax. We are still studying this complex issue. In removing interest tax on Hong Kong dollar deposits with financial institutions, we are doing the most that is possible, pending the outcome of our study. I hope to be in a position to propose more lasting reforms in these fields of taxation in the budget next February.
These measures are designed to stabilise the exchange value of the Hong Kong dollar, and thus to provide a climate for growing prosperity with restrained inflation. The government has confidence in the stabilised exchange rate. So can the people of Hong Kong. Let us now get on with our business.
Other Distribution: Department Heads