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FINANCIAL STRUCTURE
There are few exemptions from rates. Premises used for educa- tional, charitable and welfare purposes are rated, but most of the bodies running these establishments are reimbursed in the form of either direct subventions or contributions toward rates.
INTERNAL REVENUE
As a temporary war-time measure, income was first subject to direct taxation in Hong Kong in 1940 and, although the War Revenue Ordinance was not repealed until 1947, no attempt was made to collect tax in the two years following the liberation of the Colony. However, a new source of revenue was by then essential and it was decided that as a permanent measure a direct tax on earnings and profits would be imposed from April 1, 1947. Under the Inland Revenue Ordinance, 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 Hong Kong whether remitted
here or not.
The standard rate of tax was raised to 15 per cent from April 1, 1966, having stood at 122 per cent for the previous 15 years and at 10 per cent before that.
Earnings and profits are classified into four categories each of which is subject to a separate tax-Property Tax, Salaries Tax, Profits Tax and Interest Tax. Property Tax is charged on the net rateable value of any land or building in the Colony, with the exception of land or buildings in the New Territories and land or buildings wholly occupied by the owner as his residence; it is pay- able by the person paying the rates who, if he is not the owner, can then recover from the owner by deduction from rent or any other money due to him. Interest Tax is charged on the recipient of interest arising in or derived from the Colony; but the borrower, when paying or crediting the interest to the lender recipient, is required by law to make a deduction for Interest Tax and pay it to the Government within 30 days. Dividends are regarded as paid out of taxed profits and exempt from further tax. Salaries Tax and Profits Tax are levied by direct assessment.
Tax is charged at the standard rate except for Salaries Tax, which is subject to personal allowance deduction and a sliding scale of tax; and for property owners for whom, if the rent receivable is controlled by reference to the 1941 rental, the Property Tax charge is reduced to one-half the standard rate. Also, as an alternative to the separate taxes, a resident may elect to have personal assessment.