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WEDNESDAY, FEBRUARY 28, 1979
CALL FOR REVIEW OF TAX LIABILITY ON SHARE OPTIONS
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A REVIEW OF THE PROVISIONS UNDER THE INLAND REVENUE ORDINANCE REGARDING LIABILITY TO TAX ON SHARE OPTIONS GRANTED TO EMPLOYEES IS CALLED FOR, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE SAID.
MR. HADDON-CAVE SAID HE HAD RECEIVED REPRESENTATIONS THAT THE TREATMENT OF SHARE OPTIONS SHOULD BE ALTERED.
+UNDER THE EXISTING PROVISIONS OF THE INLAND REVENUE ORDINANCE THE RECIPIENT OF SHARE OPTIONS BECOMES LIABLE TO TAX AT THE TIME HE EXERCISES HIS OPTION TO BUY SHARES, AND THE AMOUNT OF TAX IS ASSESSED ON THE BASIS OF THE DIFFERENCE BETWEEN WHAT HE PAYS FOR THE SHARES AND THE IR MARKET VALUE AT THE TIME.
+SO. ON A RISING MARKET. THE TAX LIABILITY INCREASES THE LONGER THE EXERCISE OF THE OPTION IS DEFERRED, THE FINANCIAL SECRETARY SAID.
MR. HADDON-CAVE SAID HE WOULD NOT WISH TO DISPUTE THE IDEA OF ENCOURAGING THE GIVING OF SHARE OPTIONS TO EMPLOYEES, AND HE HAD ASKED THE COMMISSIONER OF INLAND REVENUE TO SEE WHETHER ANYTHING COULD BE DONE TO ALLEVIATE THE TAX LIABILITY.
HE SAID HE SAW LITTLE PROSPECT OF OUR BEING ABLE TO DEVISE AN ACCEPTABLE AND ADMINISTRATIVELY SIMPLE SCHEME WHICH WOULD NOT BE OPEN TO ABUSE.
+AT THE SAME TIME, I HAVE BEEN ADVISED BY THE COMMISSIONER OF INLAND REVENUE THAT THERE ARE SIGNS THAT EVEN THE EXISTING CHARGE IS BEING AVOIDED. SO A REVIEW OF THE RELEVANT PROVISIONS OF THE ORDINANCE IS CALLED FOR ANYWAY, PARTICULARLY AS THEY ARE BASED ON A RECOMMENDATION OF THE SECOND' INLAND REVENUE ORDINANCE REVIEW COMMITTEE WHICH REPORTED AS LONG AGO AS 1966, + THE FINANCIAL SECRETARY ADDED.
MR. HADDON-CAVE WENT ON TO COMMENT ON TAXATION TREATMENT OF RETIREMENT BENEFITS. HE RECALLED THAT ON AUGUST 2 LAST YEAR, THE FORMER SENIOR UNOFFICIAL MEMBER OF THE LEGISLATIVE COUNCIL SIR SZE-YUEN CHUNG SPOKE ON THE SUBJECT.
SIR SZE-YUEN, THE FINANCIAL SECRETARY SAID, QUESTIONED THE DISCRETIONARY POWERS EXERCISED BY THE COMMISSIONER OF INLAND REVENUE
IN WITHHOLDING APPROVAL FROM UNFUNDED AND SELF-ADMINISTERED RETIREMENT SCHEMES.
SIR SZE-YUEN HAD PROPOSED THAT A SECOND CATEGORY OF APPROVED SCHEMES BY GIVEN OFFICIAL RECOGNITION, THAT IS TO SAY, NON- CONTRIBUTORY RETIREMENT SCHEMES, THE FUNDS OF WHICH ARE NOT SEPARATELY FUNDED AND ADMINISTERED, BUT LEFT IN THE COMPANY'S OWN BUS INESS.
MR. HADDON-CAVE SAID: +1 UNDERTOOK TO LOOK INTO THIS QUESTION BUT, AFTER CAREFUL CONSIDERATION, I AM AFRAID THAT, BOTH THE COMMISSIONER OF INLAND REVENUE AND HAVE COME TO THE CONCLUSION THAT THERE WOULD BE AS MANY OBJECTIONS TO SIR SZE-YUEN'S PROPOSALS AS THERE ARE SAID TO BE TO THE PRESENT ARRANGEMENTS.+
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