- 6
Friday, March 2, 1973
"Secondly, saving and providing for one's family is a matter of
personal choice, purely private or domestic expenditure only ranking for
deduction if legislation so specifically provided. In modern society, saving
can be accomplished in many ways and these ways are open now to the majority
of taxpayers who perhaps 50 or 100 years ago would have had neither the means
nor the opportunity to participate in such methods. Indeed, the life assurance
companies themselves by extension of their business into linked unit investment
schemes have recognised this too and, in many cases, have entered into areas
where investment precedes insurance.
Contributions to these schemes, although
accepted as qualifying for relief in Britain, are not always deductible under
Hong Kong law. Taxpayers in Hong Kong have often found it difficult to appreciate
the distinction between insurance premia and such annual contributions to linked
schemes which only have a modicum of life cover linked with them.
'Thirdly, schemes linking life assurance and investment have also posed
considerable problems for the Commissioner of Inland Revenue. He has found it
difficult to identify whether the policies were predominantly for investment
or insurance. In addition, where satisfaction was given as to the life
insurance element, he had difficulty in identifying the capital sum assured.
Another problem lay in the fact that many of the premiums were paid in currencies
other than the Hong Kong dollar and payments had to be made on specified dates
which could be annually, quarterly or monthly. If taxpayers showed their
actual Hong Kong dollar cost of purchasing foreign currency then this was the
figure allowed, but in many cases the taxpayers simply reported the amount of
foreign currency paid leaving the job of conversion to the Inland Revenue
Department giving rise to subsequent arguments as to the actual rate used for
the calculations. In fact, it was often doubtful if premia were paid out of
Hong Kong income at all.
/Finally,