The Economy
businesses were taxed at 15 per cent and profits of corporations at 16.5 per cent. Profits tax is charged provisionally on the basis of profits made in the year preceding the year of assessment and is subsequently adjusted according to the 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. Interest income, other than that received by financial institutions, and dividends received from corporations are exempt from profits tax. In 2011-12, the total profits tax collected was about $118.6 billion (about 27 per cent of total government revenue).
Salaries tax is charged on emoluments arising in, or derived from, Hong Kong. As with profits tax, a provisional tax mechanism is in place. Salaries tax is calculated at progressive rates on the net chargeable income (ie income less deductions and allowances). In 2011-12, the first, second and third segments of net chargeable income of $40,000 each were taxed at 2 per cent, 7 per cent and 12 per cent respectively, and the remainder at 17 per cent. No one, however, needed to pay more than the standard rate of 15 per cent of his or her total income after deductions.
The earnings of husbands and wives are reported and assessed separately. However, where the deductions and allowances of either spouse exceed his or her income, or when separate assessments would result in an increase in their total salaries tax payable, the couple may elect to be assessed jointly. Salaries tax contributed some $51.8 billion (about 12 per cent of total government revenue) in 2011-12. Due to the generous personal allowances under the Hong Kong tax law, only about 1.5 million people, or 43 per cent of the workforce, were liable to salaries tax for the year of assessment 2010-11.
Owners of land and buildings in Hong Kong are charged to property tax at the standard rate (15 per cent in 2011-12) on the actual rent received after an allowance of 20 per cent for repairs and maintenance. There is a system of provisional payment of tax similar to that for profits tax and salaries tax. Properties owned by a corporation carrying on a business in Hong Kong are exempt from property tax, but the profits it derived from the properties are chargeable to profits tax. Property tax contributed some $1.9 billion (about 0.4 per cent of total government revenue) in
2011-12.
Stamp duty is imposed on different classes of documents relating to transfers of immovable property, leases and transfers of shares under the Stamp Duty Ordinance. In 2011-12, the revenue from stamp duties was some $44.4 billion, or about 10 per cent of total government
revenue.
Betting duty is charged on the net stake receipts from betting on horse races and football matches and on the proceeds of Mark Six lotteries, all administrated by the Hong Kong Jockey Club. Betting duty on horse races is charged at progressive rates. In 2011-12, the rates of betting duty on horse races were 72.5 per cent on the first $11 billion of net stake receipts, 73 per cent, 73.5 per cent, 74 per cent and 74.5 per cent for each segment of $1 billion thereafter; and 75 per cent on the remaining net stake receipts. The betting duty on football matches was 50 per cent of the net stake receipts. The betting duty on Mark Six lotteries was 25 per cent of the proceeds. The yield from betting duty in 2011-12 totalled some $15.8 billion, about 4 per cent of total government revenue.
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