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THE ECONOMY
as are charitable donations to the extent of 10 per cent of net assessable profits. There is no withholding tax on dividends paid by corporations, and dividends received from corporations are exempt.
Salaries tax is charged on emoluments arising in, or derived from, Hong Kong. The basis of assessment and the method of payment are similar to the system for profits tax. Tax payable is calculated on a sliding scale which varies from five per cent to 25 per cent on $10,000 segments of income (that is, income after deduction of allowances). However, the overall effective rate is restricted to a maximum of 17 per cent of income before the deduction of personal or other allowances.
Property tax is charged on the owner of land or buildings in Hong Kong at the standard rate of 17 per cent on the actual rent received, less an allowance of 20 per cent for repairs and maintenance. From the year of assessment commencing on April 1, 1983, a system of provisional payment of tax similar to that under profits tax and salaries tax has come into operation. Property owned by a corporation carrying on a business in Hong Kong is exempt from property tax but the profits derived from the ownership are chargeable to profits tax.
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Interest tax is charged on interest arising in or derived from Hong Kong. This is basically a withholding tax deducted at source unless the interest 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. The rate of interest tax on interest paid or payable after February 24, 1982, and before October 17, 1983, on deposits in Hong Kong currency placed with financial institutions carrying on business in Hong Kong was 10 per cent. The rate for all other chargeable interest is 17 per cent. Interest payable on foreign currency deposits placed with financial institutions carrying on business in Hong Kong is exempt from tax, as is interest paid or payable after October 16, 1983, on a deposit in Hong Kong currency placed with such financial institutions. Interest paid or payable by the government and public utilities is also exempt from tax, provided it does not exceed a specified rate, which varies according to the prevailing level of interest rates.
Business registration fees, which form part of the revenue from fees and charges, are also collected by the Inland Revenue Department. Business registration is compulsory for companies incorporated in Hong Kong, overseas companies with a place of business in Hong Kong and businesses operating in Hong Kong, except those run by charitable institutions and licensed hawkers. The annual registration fee is $350 but exemption from payment is granted where the business is small. With effect from October 1, 1984, every branch of a business is required to obtain a branch registration certificate and pay an annual registration fee of $15. In addition, a levy of $100, which is to be paid to the Protection of Wages on Insolvency Fund, is imposed on each business registration certificate issued to a business or its branch.
Other revenue arises from taxes on the registration of motor vehicles, fines, forfeitures and penalties, royalties and concessions, yields from properties, investments and land transactions, reimbursements and contributions, government utilities, and from fees and charges for the provision of a wide range of goods and services.
Audit of Public Accounts
The audit of all the government's accounts is carried out by the Director of Audit. He also audits the accounts of the Urban Council, the Housing Authority and more than 50 statutory and non-statutory funds and other public bodies, as well as reviewing the financial aspect of the operations of the multifarious government-subvented organisations