FRIDAY, MAY 9, 1975
MORE FLEXIBILITY IN SETTING TAX-FREE INTEREST
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GREATER FLEXIBILITY ON THE SPECIFICATION OF TAX-FREE INTEREST PAYABLE BY LICENSED BANKS, PUBLIC UTILITY COMPANIES AND THE GOVERNMENT WILL BE PROVIDED UNDER AN AMENDING BILL GAZETTED TODAY.
THE INLAND REVENUE (AMENDMENT) (NO.4) BILL 1975 SEEKS TO INTRODUCE FLEXIBILITY BY ENABLING A DIFFERENT RATE TO BE SPECIFIED FOR ANY OF THE DIFFERENT CLASSES OF INTEREST PAYERS.
THE BILL, WHICH WILL BE INTRODUCED SHORTLY INTO THE LEGISLATIVE COUNCIL, ALSO SPECIFIES THE MAXIMUM TAX-FREE INTEREST RATES PAYABLE BY LICENSED BANKS, PUBLIC UTILITY COMPANY AND THE GOVERNMENT WITH EFFECT FROM MARCH 1, UNTIL FURTHER AMENDMENT.
IN ADDITION, THE BILL SEEKS TO MAKE THE SPECIFIED RATES VARIABLE BY THE GOVERNOR IN COUNCIL RATHER THAN BY RESOLUTION OF THE LEGISLATIVE COUNCIL PROVIDED THAT ANY RATE SPECIFIED IN THIS WAY IS NOT GREATER THAN FIVE PER CENT PER ANNUM.
THESE AMENDMENTS AIM AT LESSENING THE DIFFICULTY OF CHANGING THE EXEMPTION RATES QUICKLY AT TIMES WHEN BANK INTEREST RATES ARE SUBJECT TO FREQUENT CHANGES AS HAS RECENTLY BEEN THE CASE.
IN A SERIES OF INTEREST RATE REDUCTIONS ANNOUNCED RECENTLY BY BANKS, THE RATES PAID ON SHORTER-TERM TIME DEPOSIT WERE TWICE BROUGHT BELOW THE TAX-FREE INTEREST RATE PROVIDED IN THE INLAND REVENUE ORDINANCE.
AND THE LAST TWO CHANGES TOOK PLACE BEFORE IT HAD BEEN POSSIBLE FOR THE GOVERNMENT TO INTRODUCE INTO THE LEGISLATIVE COUNCIL A DRAFT RESOLUTION TO LOWER THE EXEMPTION RATE.
THE PROPOSED REDUCTION TO 2-1/2 PER CENT IN THE EXEMPTION RATE MAKES TAXABLE THE INTEREST PAID BY THE GOVERNMENT ON THE 3-1/2 PER CENT REHABILITATION LOAN.
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