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Currently, the marginal tax band widths are set at either $20,000 or $30,000. Mr Tsang proposed to standardise them at the level of $30,000 and to rationalise the marginal tax rate by adopting a uniform interval of 6 per cent.
"This revamping will simplify the structure and make it easier to understand," he said.
Mr Tsang explained the changes:
The first marginal tax band will be widened from $20,000 to $30,000, and the marginal tax rate will be kept at the current low level of 2 per
cent.
The width of the second marginal tax band will be maintained at $30,000, but the marginal tax rate will be reduced from 9 per cent to 8 per cent.
The width of the third marginal tax band will also be maintained at $30,000, but the marginal tax rate will be reduced from 17 per cent to 14 per cent.
The top marginal tax rate will be kept at the current level of 20 per cent.
He said that this meant a taxpayer with a chargeable income of $100,000 would pay nearly 25 per cent less tax. The number of salaries taxpayers who had to pay the standard rate of 15 per cent would also decrease, he said.
"The concessions I propose this afternoon will benefit 96 per cent of our salaries taxpayers," Mr Tsang said.
He then gave some concrete examples of how he proposed to cut the tax bills for individual employees and their families.
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A single-income family of four, earning $22,000 a month, will have its tax bill cut by nearly 90 per cent. It will pay less than $20 a month in
tax.
The typical sandwich-class family, with a monthly income of $26,000, will pay 68 per cent less tax. It will pay only $237 a month in tax.
A married couple with two children will have to earn over $100,000 a month, or more than $1.2 million a year, before they pay salaries tax at the standard rate of 15 per cent.