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FINANCIAL STRUCTURE
these establishments receive back the amount of rates paid in the form of either direct subventions or contributions toward rates.
INTERNAL REVENUE
Income was first subjected to direct taxation in Hong Kong in 1940 as a temporary war-time measure and no attempt was made to collect tax after the liberation of the Colony, although the ordinance was not repealed until 1947. However, a new source of revenue was by then essential and it was decided to impose a direct tax on earnings and profits as a permanent measure. Under the Inland Revenue Ordinance 1950, tax is charged only on income or profits arising in or derived from the Colony. No tax is charged on income or profits arising outside the Colony whether remitted here or not. The ordinance aims at simplicity and charges tax generally at source and at a flat rate rather than in the hands of the eventual recipient on a sliding scale. Thus there is no need to as- certain the total income of each individual.
Income and profits are grouped in four categories, each of which is subject to a separate tax-Property Tax, Salaries Tax, Profits Tax and Interest Tax. A fifth and aggregate tax known as Personal Assessment is chargeable on people who so elect. In that case the individual's income, otherwise chargeable to the four separate taxes, is aggregated in a single sum which is reduced by personal allowances and tax, charged on a sliding scales, granting reduced rate reliefs. The privilege of election is not available to non-residents.
The standard rate of tax was raised to 15 per cent from April 1, 1966, having stood at 12 per cent for the previous 15 years. 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 a business is restricted to one-half of the amount by which the profits exceed $7,000. Property Tax is charged on the net rate- able value of any land or building in the Colony with the exception of those in the New Territories and those wholly occupied by the owner as his residence. If the rent receivable is controlled by reference to 1941 rental, the charge is at one-half the standard rate, otherwise tax is payable at the full standard rate. Salaries Tax