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FINANCIAL STRUCTURE
either 74 per cent or 11 per cent, depending on the type of bet placed, and at 25 per cent on the proceeds of lotteries. The duty on bets and lotteries is recovered from the Royal Hong Kong Jockey Club which holds the monopoly for conducting such opera- tions, including off-course betting. The estimated yield for the year ending March 31, 1979, is $480 million.
Hotel Accommodation Tax is imposed on hotel and guest house accommodation and is levied at the rate of four per cent on the accommodation charges paid by guests. For the 1978-9 financial year, this tax is estimated to yield $21 million.
Business Registration is compulsory for every company incorporated in Hong Kong, every overseas company with a place of business in Hong Kong and every business operating in Hong Kong, except those carried on by charitable institutions. The annual registration fee is $150 but exemption from payment of the fee is granted where the business is small. The total income from these fees, service fees for copies of docu- ments and other fees for the 1978-9 fiscal year is expected to be $36 million.
Monetary System
the Hongkong and Shanghai
Bank notes are issued by two commercial banks Banking Corporation and the Chartered Bank. Legislation empowering the Mercan- tile Bank to issue notes was repealed during the year. Mercantile Bank notes still in circulation are now legally the obligation of the Hongkong and Shanghai Banking Corporation which has taken over the Mercantile Bank's authorised note-issuing powers. Coins of $5, $2, $1, 50 cents, 20 cents, 10 cents and five cents and currency notes of one cent denomination are issued by the government. A new, smaller $1 coin was-introduced in August as the last stage in the reform of Hong Kong's coinage recommended by the Coinage Review Committee in 1974. Consideration was also given to replacing the existing 10 cent coin. The third of a series of $1,000 gold coins to commemorate the Chinese Lunar New Year was issued early in 1978. The total currency in nominal circulation at the end of 1978 and details of its composition are shown in Appendix 11.
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Hong Kong has no central bank but its bank notes, although issued by commercial banks, are backed by the Exchange Fund, a government account set up in 1935 when the Hong Kong dollar ceased to be based on silver. The Exchange Fund is managed by the Monetary Affairs Branch of the Government Secretariat. Apart from small authorised issues, which are limited to $95 million and are issued against securities of a kind approved by the Secretary of State and deposited to the order of the govern- ment, bank notes may only be issued against holdings of certificates of indebtedness, which are liabilities of the Exchange Fund. These certificates are non-interest-bearing and are issued and redeemed as the value of notes in circulation rises and falls. The fund receives and makes payment in Hong Kong dollars through accounts it holds with the note-issuing banks. The fund bears the cost of maintaining the note issue except for a small proportion, equivalent to the proportion of authorised issues to the total note issue, which is met by the note-issuing banks. The bulk of the fund's re- sources are held in foreign currencies and are employed in a variety of deposits and investments denominated in several currencies. Until 1971 virtually all of those funds, and overseas assets held by the General Account as well, were in sterling. But since then, sterling holdings have been progressively diversified. Sterling now accounts