4.
The major constituents of the arrears of $1,505 million at 30 June 1985 related to-
5.
Internal Revenue
Fixed Penalty System (Traffic Contraventions and Criminal Proceedings)
$1,327 million
$93 million
The arrears of $1,327 million relating to Internal Revenue reflect an increase of $146 million over the reported arrears at 30 June 1984. Of the amount of $1,327 million, $1,256 million related to earnings and profits tax representing an increase of 12.8% over the corresponding figure in the previous year. The greater part of the arrears of earnings and profits tax was attributable to the substantial amount of profits tax in default, caused in part by the tight liquidity situation still being experienced by some businesses and more particularly by the difficulties of a number of real estate companies and related enterprises. Over 51% of the arrears of earnings and profits tax relate to tax due in 1983-84 and before. The 49% of the arrears of earnings and profits tax which relate to tax due in 1984-85 totalled $607 million, reflecting an improvement over the corresponding figure in the previous year.
6.
The arrears of $93 million relating to the Fixed Penalty System (Traffic Contraventions and Criminal Proceedings) are commented on in paragraphs 23 to 24 below.
7.
Fees for contractual services rendered by the police forces and the Fire Services Department. Section 39(2)(b) of the Police Force Ordinance provides that all sums paid for the hire of police officers should be credited to the Police Welfare Fund and Section 18(b) of the Fire Services Ordinance provides that all sums paid for the services of members of the Fire Services Department detailed to do special duties under Section 23 of the Ordinance, should be credited to the Fire Services Department Welfare Fund. In a recent audit review of the legality and appropriateness of crediting the fees to the welfare funds, it was revealed that during the nine year period from 1976 to 1985 $7.2 million was incorrectly credited to the Police Welfare Fund instead of to the general revenue. The review also brought to notice an unresolved and long standing issue concerning the appropriateness of crediting the fees to the welfare funds as permitted in the Ordinances when the cost of providing the services giving rise to such fees is borne by the general revenue.