2 -
Both Mrs. Fan and Mr. Poon have referred to the
need to produce clear and concise practice notes as soon as possible. I can confirm that the Commissioner expects to issue his practice notes covering this new legislation shortly, hopefully before the end of April. He assures me that they will be designed to reflect the law both in letter and in spirit. I can also confirm for Mrs. Fan's benefit that sections 61A and B will only be used to
strike down blatant and contrived schemes where there is
a clear and dominant tax avoidance purpose. It is not
the intention to use the law to penalise
commercial transactions.
genuine
I turn now to the amendments to clause 4 of the
Bill which I propose to move during the Committee Stage. These relatively minor amendments to section 16 (2) (f) comprise three refinements to the proposed extension of the conditions under which interest paid by corporations will be deductible for profits tax purposes. The most important of these is the amendment to section 16(2)(f)(iii). This will extend deductibility to interest paid where the money borrowed originated in the issue by an associated corporation of marketable, albeit unlisted, "commercial paper". This is a logical refinement to the extension to section 16 (2) proposed in the Bill and should help foster Hong Kong's position as a major financial centre.
The other refinements are minor changes designed to ensure that the section can apply to issues by corporations whose ordinary
ordinary business is not the raising of funds and to treat equally issues which are marketable in approved financial centres with those which are marketable in Hong Kong.