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Answer:
The surcharge imposed by the Inland Revenue Department (IRD) on tax overdue is a penalty and a deterrent against default or late payment in tax.
Overpayment of tax by taxpayers would normally arise in the following
circumstances:
(a)
(b)
the amount of provisional tax paid by a taxpayer exceeds his final tax liability for the same year of assessment due to reduced income, increase in tax allowances or other reasons; or
correction of an error or omission in the taxpayer's tax return.
In respect of (a) above, a taxpayer may apply to have the whole or part of his provisional tax held over if his net chargeable income for the year concerned is likely to be less than 90% of that assessed provisionally, or if he has become entitled to additional tax allowances in the year in question. In respect of (b) above, the need for revision of assessment and refund of tax paid can be much reduced if taxpayers exercise care in completing their tax returns and file them in good time. There is no provision under existing law for payment of interest on tax refunded under the above circumstances.
Separately, however, interest is payable in respect of certain tax reserve certificates (TRCs) purchased by taxpayers in connection with their objection to the tax assessment made by the IRD. Under the existing law, if the taxpayer is aggrieved by IRD's assessment, he may lodge an objection. The Commissioner of Inland Revenue will consider his claim and may hold over the whole or part of the tax in dispute on the condition that the taxpayer purchases an equal amount of TRCs. If upon determination of the objection, the whole or part of the tax held over has to be discharged, the taxpayer can redeem the corresponding amount of TRCs purchased and will receive interest on them.
There are thus adequate means under the existing system for taxpayers to avoid overpayment of tax and we do not consider that there is a need for payment of interest on tax refunded.
End
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