THE ECONOMY
61
During the year, preparatory work for a general review of all rateable values was initiated, with a view to adopting the new rateable values on April 1, 1988. Approximately 500 000 requisition forms were issued to ratepayers in October and December 1986, and some 250 000 more will be issued between January and April 1987. The purpose is to obtain rental information which will be analysed and used as the basis for the assessment of new rateable values.
The taxes and duties making up the internal revenue, with the exception of the air passenger departure tax and the Cross-Harbour Tunnel passage tax, are collected by the Inland Revenue Department. These consist of betting duty, entertainments tax, estate duty, hotel accommodation tax, stamp duty, and earnings and profits tax.
Betting duty is imposed on bets on authorised totalisators and the proceeds of Mark Six lotteries. The rate of duty is either 9.5 per cent or 16 per cent of the amount of the bet, depending on the type of bet placed, and is 30 per cent on the proceeds of lotteries.
Entertainments tax is imposed on the price of admission to cinemas and race meetings at rates which vary with the prices charged for admission. This averages about nine per cent in the case of cinemas and 29 per cent in the case of race meetings.
Estate duty is imposed on that part of a deceased's estate situated in Hong Kong. The rates of duty charged range from a minimum of ten per cent on estates valued between $2 million and $2.5 million to a maximum of 18 per cent on estates valued in excess of $4 million. Estates valued at less than $2 million are exempt from duty.
Hotel accommodation tax of five per cent is imposed on expenditure on accommodation by guests in hotels and guest houses.
The Stamp Duty Ordinance imposes fixed and ad valorem duties on different classes of documents relating to assignments of immovable property, leases and share transfers.
Earnings and profits tax are levied under the Inland Revenue Ordinance. Hong Kong has a schedular system of taxation whereby persons liable may be assessed to tax on four separate and distinct sources of income, namely business profits, salaries, income from property and interest income. Personal assessment is a form of aggregation superimposed upon the schedular system. The standard rate of tax is 17 per cent.
Profits tax is charged only on profits arising in Hong Kong, or derived from Hong Kong from a trade, profession or business carried on in Hong Kong. Profits of unincorporated businesses are taxed at 17 per cent whereas profits of corporations are taxed at 18.5 per cent. Assessable profits are determined on the actual profits for the year of assessment. The tax is paid provisionally on the basis of profits of the year preceding the year of assessment. As in many countries, profits assessable to profits tax in Hong Kong are the net profits. Generally, all expenses incurred in the production of assessable profits are deductible. There is no withholding tax on dividends paid by corporations, and dividends received from corporations are exempt from profits tax.
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 net income (that is, income after deduction of allowances). With effect from the year of assessment commencing on April 1, 1985, the segment to which the 20 per cent rate applies has been widened from $10,000 to $20,000. However, the overall effective rate is restricted to a maximum of 17 per cent of income before the deduction of personal and 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