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FINANCIAL STRUCTURE
effect on April 1, 1978, completing the mainland sector. The final phase, covering certain outlying islands, is scheduled for 1980.
New valuation lists are prepared periodically, as ordered by the Governor, enabling assessments to be reviewed and rateable values to be updated in line with current market levels. The last review of rateable values was carried out in 1976. It resulted in greatly increased rateable values for almost all rated property included in the lists which came into force on April 1, 1977. To cushion the impact of the increase on ratepayers, the annual percentage charges were substantially reduced and a scheme of rate reliefs introduced, whereby no ratepayer will pay in the 1977-8 and 1978-9 financial years an increase of more than 333 per cent of the rates payable in the immediately preceding year. In the case of pre-war rent-controlled properties, the scheme will extend beyond 1978–9 to alleviate the greatly increased rate charges which, due to a change in the basis of assessment, occurred in many instances.
Rates are payable quarterly in advance and the law imposes penalties for late payment. Exemptions from rates are few. However the government generally provides financial assistance towards the payment of rates to non-profit-making educational, charitable and welfare organisations if the premises they occupy are being run to further an approved target or policy. No refund of rates is made in the case of vacant domestic premises, but half of the amount of rates paid may be refunded where non- domestic premises are vacant.
The valuation lists are continually growing in size to keep pace with building development, and the number of assessments now exceeds 500,000 with a total rateable value of more than $10,000 million. The estimated rates revenue for 1978-9 is $1,163 million, of which about $368 million will go to the Urban Council.
Internal Revenue
The taxes and duties making up internal revenue are collected by the Inland Revenue Department and consist of Earnings and Profits Tax, Estate Duty, Stamp Duty, Entertainments Tax, Betting Duty, Hotel Accommodation Tax and Business Regis- tration fees. Internal revenue is estimated to yield $5,070 million in the 1978-9 financial year, representing about 50 per cent of Hong Kong's expected total revenue and receipts for 1978-9.
Earnings and Profits Tax is levied under the Inland Revenue Ordinance upon speci- fied sources of income arising in or derived from Hong Kong namely business profits, salaries, property and interest. The current standard rate of 15 per cent has been in force since April 1, 1966. It is estimated that the taxes on earnings and profits will yield $3,990 million in the 1978-9 financial year.
Profits Tax is charged on profits arising in or derived from Hong Kong from a trade or business carried on in Hong Kong. Profits of unincorporated businesses are chargeable to tax at the standard rate of 15 per cent and corporations at 17 per cent. Generally all expenses, to the extent to which they have been incurred in the production of profits chargeable to tax, are deductible. Charitable donations up to a maximum of 10 per cent of net assessable profits are also 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, that is, income after deduction of personal allowances. However,
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