THE ECONOMY
computer systems, medical supplies and equipment, waterworks items, electrical appliances, telecommunication equipment and services, and food provisions.
Supplies of goods to meet general needs are held in the purpose-built Government Logistics Centre in Chai Wan which was put into operation in late 1996. In 1996–97, the department acquired stock items with a total value of $382 million and issued items worth $437 million to its customers. The department also seconds staff to other departments to ensure a professional approach to acquisition and maintenance of stores and equipment.
Revenue Sources
Hong Kong's tax system is simple and relatively inexpensive to administer. Tax rates are low, and the government accords a high priority to curbing tax evasion and minimising opportunities for tax avoidance. The major sources of revenue are profits tax, salaries tax and revenue from land transactions. Other significant sources include stamp duty on property and stock transactions, betting duty, fees and charges for services provided by the government, returns on properties and investments and duties on certain specified commodities. (For major sources of revenue, see Appendix 15).
The Inland Revenue Department collects about 50 per cent of total revenue, including profits and salaries taxes, stamp duty, betting duty, estate duty and hotel accommodation tax. Profits and salaries taxes, which alone accounted for about 40 per cent of total revenue in 1996–97, are levied under the Inland Revenue Ordinance. Persons liable to these taxes may be assessed on three separate and distinct sources of income: business profits, salaries and income from property.
Profits tax is charged only on net profits arising in Hong Kong, or derived from a trade, profession or business carried on in Hong Kong. In 1997, profits of unincorporated businesses were taxed at 15 per cent and profits of corporations at 16.5 per cent. Tax is payable on the actual profits for the year of assessment.
Profits tax is paid initially on the basis of profits made in the year preceding the year of assessment and is subsequently adjusted according to profits actually made in the assessment year. 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. In 1996-97, the government received about $50 billion in profits tax, or about 24 per cent of total
revenue.
Salaries tax is charged on emoluments arising in, or derived from, Hong Kong. The basis of assessment and method of payment (including provisional payments) are similar to the system for profits tax. Tax payable is calculated on a sliding scale which progressed from 2 per cent, 8 per cent and 14 per cent on the first, second and third segments of net income (that is, income after deduction of allowances) of $30,000 each, respectively, and then to 20 per cent on the remaining net income. No one, however, needs to pay more than 15 per cent of his or her total income. The earnings of husbands and wives are reported and assessed separately. However, where either spouse has allowances that exceed his or her income, or when separate assessments would result in an increase in salaries tax payable by the couple, they may elect to be assessed jointly. Salaries tax contributed some $28.7 billion, or about 14 per cent of total revenue, in 1996–97. Due to generous personal allowances under Hong Kong
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