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10.
for the purpose of this Chapter a pension or annuity includes any annual payment not being:
b
a income as defined in subsection (1) of this Section,
income chargeable to tax under Chapters II, IV, or 7 a return of capital
and shall include a pension or annuity which is voluntary or is capable of being discontinued.
We submit that expenses incidental to the earing of salaries, etc., should be allowed as deductions and we therefore suggest that Section 13 be replaced by the following:-
11.
Before arriving at the net chargeable income of an individual assessable to tax under this Chapter, there shall be deducted from his assessable income the following:-
83)
the allowances provided under Section 43; and
any outgoings and expenses wholly, exclusively and necessarily incurred in the production of that income.
As drafted, the scale of taxes involves the possible charging of salaries at a higher effective rate than is charged. upon profits. This would appear inequitable, the more especially as a salary is in every case earned income, whereas profits are not necessarily earned by the recipients. We therefore propose the following further proviso to Section 14:-
and provided also that in no case shall the amount of Jalaries and Annuities Tax chargeable on any individual exceed the amount which would have been chargeable on him had the standard rate of tax been charged on the whole of his income chargeable to Salaries and Annuities Tax before deducting the allowances provided in Section 13.
CHAPTER IV PROFITS TAX
12.
13.
14.
Section 16:
In conformity with the recommendations which we make later in this report regarding personal allowances, the limit under provisions (i) (ii) should be increased from five thousand dollars to seven thousand dollars.
Section 19(6):
The words "aubsections (2), (3), (44) or (5) of require to be inserted between the words "under" and "this Section".
Section 20: As originally drafted, this Section provides that set-offs for losses should not reduce tax payable for any one year of assessment to less than one-half of the amount which would have been payable had the set-offs not been made. We understand that this section follows the recommendations of the Model Ordinance provided by the Colonial Office and that according to the Report to which that Model Ordinance is an Appendix this proviso is inserted to protect the Revenue in the case of Colonies which rely wholly, or to a very large extent, upon one industry or trade. That is not the case in Hong Kong and on the proposal of the Commissioner we suggest the deletion of these provisos.