WEDNESDAY, OCTOBER 8, 1980
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+POOLING SYSTEM ON ASSETS PROPOSED
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ATTENTION WAS DRAWN IN THIS YEAR'S BUDGET SPEECH TO THE COMMENT BY THE THIRD INLAND REVENUE ORDINANCE REVIEW COMMITTEE THAT THE NEED TO KEEP TRACK OF INDIVIDUAL ITEMS OF PLANT AND EQUIPMENT FOR THE SAKE OF MAKING A BALANCING ALLOWANCE OR CHARGE IN THE EVENT OF A DISPOSAL RESULTED IN RELATIVELY HIGH ADMINISTRATIVE COSTS.
THE FINANCIAL SECRETARY, THE HON SIR PHILIP HADDON-CAVE, SAID THIS IN MOVING THE SECOND READING OF THE INLAND REVENUE (AMENDMENT) (NO 4) BILL 1980 AT THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).
HE PROPOSED THAT A +POOLING SYSTEM SHOULD BE INTRODUCED TO REDUCE ADMINISTRATIVE COSTS.
SIR PHILIP SAID THE PURPOSE OF THE BILL WAS TO IMPLEMENT THE PROPOSAL FROM APRIL 1, 1980 BY SUBSTITUTING FOR THE CURRENT SYSTEM FOR GRANTING ALLOWANCES AND IMPOSING CHARGES, THE PROVISIONS TO GRANT ALLOWANCES AND IMPOSE CHARGES ON +POOLS OF ASSETS, DEFINED
IN THE BILL AS +CLASSES OF MACHINERY OR PLANT.+
PROVISION WOULD BE MADE FOR THE EXISTING SYSTEM TO CONTINUE TO APPLY IN ANY CASE WHERE THE COMMISSIONER OF INLAND REVENUE WAS SATISFIED THAT THE APPLICATION OF THE POOLING SYSTEM WAS IMPRACTICABLE OR INEQUITABLE, HE SAID.
BUT SHORT OF A DIRECTION FROM THE COMMISSIONER, THE APPLICATION OF THE POOLING SYSTEM WOULD BE MANDATORY.
HE SAID THAT IN CONSIDERING COMMENTS FROM THE HONG KONG SOCIETY OF ACCOUNTANTS, IT HAD BECOME APPARENT THAT THE LIMITATIONS INTENDED TO BE APPLIED TO RESTRICT SALES AND OTHER DISPOSAL PROCEEDS TO THE ORIGINAL COST OF THE ASSETS DISPOSED OF, FOR THE PURPOSES OF THE CALCULATION OF BALANCING CHARGES AND THE DETERMINATION OF THE REDUCING VALUE OF A +POOL+, WERE NOT ADEQUATELY PROVIDED FOR IN THE NEW PROVISION,
AS PRESENTLY DRAFTED, SIR PHILIP SAID IT WOULD ONLY COVER THE POSITION WHERE THERE HAS BEEN A DISPOSAL OF A WHOLE CLASS OF ASSETS AT ONE TIME FOR A SINGLE PRICE.
+ IT WOULD NOT COVER A LOSS ON DISPOSAL OF ONE ASSET INCURRED DURING THE SAME BASIS PERIOD AS A PROFIT AROSE ON ANOTHER- NOR A SITUATION IN WHICH A BALANCING CHARGE MAY ARISE IN RESPECT OF A 'POOL' FOLLOWING THE DISPOSAL OF ONE OR MORE ASSETS OUT OF THE 'POOL' WHILE OTHERS ARE RETAINED IN USE, HE SAID.
AN AMENDMENT TO THE BILL WILL BE MOVED AT THE COMMITTEE STAGE SO THAT THESE TWO SITUATIONS WOULD BE COVERED, HE ADDED.
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