THE ECONOMY
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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 in 2002-03 was calculated on a sliding scale that progressed from 2 per cent, 7 per cent and 12 per cent on the first, second and third segments of net income (that is, income after deduction of allowances) of $35,000 each, respectively, and then to 17 per cent on the remaining net income. No one, however, needed to pay more than the standard rate of 15 per cent of his or her total income. The respective rates for 2003-04 are 2 per cent, 7.5 per cent, 13 per cent and 18.5 per cent with segments of $32,500 each and a standard rate of 15.5 per cent. For 2004-05, the respective rates will be 2 per cent, 8 per cent, 14 per cent and 20 per cent with segments of $30,000 each and a standard rate of 16 per cent. 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 $29.7 billion, or about 17 per cent of total revenue, in 2002-03. Owing to generous personal allowances under Hong Kong tax law, only 37 per cent of the workforce had to pay salaries tax.
As part of a package of relief measures to help the community tide over the difficulties due to the outbreak of SARS and revive the economy, a 50 per cent rebate of 2001-02 final tax on salaries tax and personal assessment, subject to $3,000 per case, was made in July 2003. The rebate cost approximately $2.3 billion with around 1.3 million taxpayers benefiting from it.
Owners of land or buildings in Hong Kong were charged property tax in 2002-03 at the standard rate of 15 per cent of the actual rent received, less an allowance of 20 per cent for repairs and maintenance. The standard rates for 2003-04 and 2004-05 are 15.5 per cent and 16 per cent respectively. There is a system of provisional payment of tax similar to that for profits tax and salaries tax. Property owned by a corporation carrying on a business in Hong Kong is exempt from property tax (but profits derived from ownership are chargeable to profits tax). Receipts from property tax accounted for about 1 per cent of total revenue, or about $1.2 billion in 2002-03.
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. The revenue from stamp duties accounted for about 4 per cent of total revenue, or about $7.5 billion, in 2002-03.
A duty is imposed on bets on horse racing administered by the Hong Kong Jockey Club, on proceeds of Mark Six lotteries and on gross profits of the Hong Kong Jockey Club's football betting operation - the only legal forms of betting in Hong Kong. The rate of duty on betting proceeds from horse racing was 12 per cent on standard bets and 19 per cent on exotic bets in 2002-03. The rate on exotic bets was increased to 20 per cent with effect from August 1, 2003. The duty on football betting, which was introduced on August 1, 2003, is charged at a rate of 50 per cent of gross profits. The yield from betting duty in 2002-03 totalled some $10.9 billion, and accounted for about 6 per cent of total revenue.
In 2002-03, estate duty was imposed on estates valued at over $7.5 million, at levels ranging from 5 per cent to a maximum of 15 per cent, while a hotel accommodation tax of 3 per cent was imposed on expenditure on accommodation by guests in hotels and guesthouses.