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FINANCIAL STRUCTURE
charge is apportioned to general rates (11 per cent) and Urban Council rates (six per cent), the latter being paid to the council to finance many of its activities. In the New Territories, for areas brought into rating for the first time, the percentage charge is reduced for the four years following the coming into force of a valuation list for that area. In 1975, seven new rating areas were specified in the New Territories and rates will be charged in these areas from April 1, 1976.
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 1975-6 is $777 million, of which $252 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, business 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. Following a proclama- tion made by the Governor on July 14, 1975, a number of previously exempted areas of the New Territories will become subject to the tax as from April 1, 1976. Properties owned by corporations carrying on business in Hong Kong are exempted, although profits from their ownership are subject to Profits Tax.
Interest Tax is charged at the standard rate on interest arising in or derived from Hong Kong. It is withheld at source unless it forms part of the profits of a corporation carrying on a trade or business in Hong Kong, in which case it is subject to Profits Tax. There is exemption for interest payable by the government and licensed banks of
up to 24 per cent per annum, and by public utilities 34 per cent-these rates being effective from March 12 and March 1, 1975, respectively.
Profits Tax is charged at the standard rate on profits arising in or derived from Hong Kong from a trade or business operated in Hong Kong. In addition, for the fiscal year ended March 31, 1976 only, corporations are subject to a surcharge of 11⁄2 percentage point on profits. Expenses incurred in the production of profits subject to tax are deductible, as are charitable donations up to a maximum of 10 per cent of net assessable profits.
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,