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This is the first of the three Bills which the Secretary for the Treasury and I will introduce this afternoon to give effect to the revenue proposals in this year's Budget.
The Bill now before Members has two main purposes. First, it seeks to introduce a number of salaries tax concessions to benefit both the taxpaying population in general and specific target groups. Secondly, it seeks to specify the minimum records which a business must keep for tax purposes, and to increase the maximum penalty for non- compliance. These proposals have already been fully covered in my Budget Speech and in the Budget Debate. I shall therefore be brief this afternoon.
Salaries tax concessions
Let me first deal with the proposed salaries tax concessions. Briefly, the Bill proposes to improve existing benefits in three ways.
First, the Bill increases most salaries tax allowances (notably, the single, married person, first and second child, and dependent parent/grandparent allowances) by 10%, slightly above the rate of inflation.
Secondly, it increases substantially the allowances for those with extra financial responsibilities. Specifically, it doubles the allowance for taxpayers who look after a dependent parent or grandparent at home and increases by 25% the single parent allowance.
Thirdly, it introduces a new disabled dependent allowance for taxpayers who support a disabled dependent, whether at home or elsewhere in Hong Kong. This new allowance will be in addition to existing allowances (for example, married person, child or dependent parent) received by the taxpayer in respect of the disabled family member in question.
We estimate that the total cost of these salaries tax concessions will amount to $1.2 billion in 1995-96 and $7.7 billion in the period up to 1998-99.
These proposals seek a prudent balance between leaving money in the pockets of taxpayers, especially those with extra financial responsibilities, and maintaining healthy reserves, whilst at the same time taking into account the impact on inflation. I believe that these proposals do represent a reasonable balance and I hope that Members will be able to support them.