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FINANCIAL STRUCTURE
per cent). In the New Territories for new areas brought into rating for the first time the percentage charge for general rates is reduced to 11 per cent for the four years following the coming into force of the valuation list for that area. One additional area of the New Territories was assessed for rates with effect from April 1, 1974 and it is proposed further to extend rating in the New Territories over the next few years.
There are few exemptions from rates. Premises used for educational, 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 towards rates. No reliefs are available for vacant domestic premises, but a refund of half the rates paid may be granted in the case of non-domestic premises.
The estimated revenue from rates for 1974-5 is $664 million, of which $246 million will go to the Urban Council.
Internal Revenue
Earnings and profits are taxed under the Inland Revenue Ordinance according to the form of the income arising in or derived from Hong Kong. The current standard rate of tax of 15 per cent has been in force since April 1, 1966. The various forms of income which are subject to separate taxes are property, profits, interest and salaries.
Property Tax is charged at the standard rate on the owner, but there are exemp- tions including property occupied by the owner for his residential purposes, vacant property, and property in unrated parts of the New Territories. The half charge on unoccupied property was cancelled. Properties owned by corporations carrying on business in Hong Kong are exempted; profits from their ownership are chargeable to Profits Tax.
Interest Tax is charged at the standard rate on interest arising in or derived from Hong Kong and is withheld at source unless it forms part of the profits of a corpora- tion carrying on a trade or business in Hong Kong, in which case it will be subjected to Profits Tax. Interest payable by the government, banks and public utilities of five per cent per annum (four per cent up to August 1, 1974) and under is exempt.
Profits Tax is charged at the standard rate on profits arising in or derived from Hong Kong from a trade or business carried on in Hong Kong. Expenses incurred in the production of those profits, and charitable donations up to 10 per cent of net assessable profit, are deductible.
Salaries Tax is charged on emoluments arising in or derived from Hong Kong. Tax is calculated on a sliding scale which varies from five per cent to 30 per cent on net chargeable income-income after deduction of personal allowances. However, the overall effective rate of tax is limited to 15 per cent of the income before deducting personal allowances. These allowances are, for the taxpayer $10,000; his wife $10,000; his first child $3,000; his second child $2,500; his third child $1,500. The allowance for fourth to sixth child is $1,000 each, and those from the seventh to ninth child $500 each. Apart from the deduction of expenses necessarily incurred in production of the income, and charitable donations up to 10 per cent of assessable income, there are no other allowances.