- 2 -
5.
I should perhaps add in relation to the HMOCS payments, that if a cessation of employment would be involved, I do not think it would be correct to regard the payments as compensation for loss of employment. The better view, in my opinion, would be to consider the payments to be
be an inducement to enter and remain in employment. This is because the payments would only be made to those who continue to serve the Government after 30 June 1997, albeit with the HKSAR.
6.
Turning to the payments to be made in the circumstances set out in paragraphs 9 and 10 of the draft proposals, these will require special consideration. In the case of an officer who is required to retire because of the abolition of his office, I feel that "the unpaid would fall within the meaning of balance of the notional sum" would fall compensation for loss of office or employment and would therefore be exempt from tax. However, where the sum in question is received on account of retirement on medical grounds or death while in service, the position is not so clear. On balance, I am inclined to the view that in these
these circumstances the payment would be chargeable as being a sum due to the officer which he would have received had he continued in employment.
7.
With regard to your paragraph 3, Departmental Interpretation and Practice Notes are issued to spell out our view of the law in areas where there may be room for doubt concerning the correct interpretation and there is likely to be significant public interest. However, in respect of the issue now before us, the application of the law appears to me to be generally quite straightforward and, as the matter has only limited application, it would not be appropriate to issue Notes stating that the payments are not taxable. Neither do I consider it would be prudent to grant
grant an extra-statutory concession in relation to this matter. In any event, you will appreciate that it would be somewhat premature to, issue any instruction at this point in time as the first payments will not be made until 1997.
(Anthony AU-YEUNG) Commissioner of Inland Revenue