PUBLIC FINANCES
59
The Ordinance aims at simplicity and to this end attempts to charge tax at source rather than on the eventual recipient. By so doing the necessity of ascertaining the total income of each individual is avoided.
Incomes and profits are grouped in four categories, each of which is subject to a separate tax, namely, Property Tax, Salaries Tax, Profits Tax and Interest Tax. A fifth and aggregate tax known as Personal Assessment is chargeable upon persons who so elect. The effect of election is that the individual's income otherwise chargeable to the four separate taxes is aggregated in a single sum which is reduced by personal allowances and charged on a sliding scale. The privilege of election is not available to non-residents.
The standard rate of tax has remained unchanged at 121% since 1950. Business profits, interest received from loans and the interest element of purchased annuities are charged to tax at the full standard rate. However where the profits of a non-corporate business are below $7,000 for any year no tax is charged and tax chargeable on such businesses is restricted to one-half of the amount by which the profits exceed $7,000. Property Tax is charged on the net rateable value of any land or building in the Colony with the exception of those situated in the New Territories and those wholly occupied by the owner as his residence. Up to and including the fiscal year 1960-1, Property Tax was charged at half the standard rate. An amendment passed at the end of March 1961 raised this charge to the full standard rate unless the rent is in fact controlled by reference to 1941 rentals when tax is charged at only half the standard rate. Salaries Tax is charged on the total income from employment reduced by allowances which are at present: allowance for taxpayer, $7,000; allowance for taxpayer's wife, $7,000; and allowances for children ranging from $2,000 for each of the first two children down to $200 for the ninth child. Premiums paid for life insurance are allowed to an amount not exceeding one-sixth of the income. Tax is charged on a scale which begins at one-fifth of the standard rate on the first $5,000 of the nett income and rises by one-fifth of the standard rate on each subsequent $5,000 until, at $45,000, the maximum of twice the standard rate is reached. However the total Salaries Tax payable by the individual is restricted to an amount not exceeding the standard rate on the gross income.