XN000022-1973-03-02 — Page 22

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Friday, March 2, 1973

"Secondly, saving and providing for one's family is a matter of

personal choice, purely private or domestic expenditure only ranking for

deduction if legislation so specifically provided. In modern society, saving

can be accomplished in many ways and these ways are open now to the majority

of taxpayers who perhaps 50 or 100 years ago would have had neither the means

nor the opportunity to participate in such methods. Indeed, the life assurance

companies themselves by extension of their business into linked unit investment

schemes have recognised this too and, in many cases, have entered into areas

where investment precedes insurance.

Contributions to these schemes, although

accepted as qualifying for relief in Britain, are not always deductible under

Hong Kong law. Taxpayers in Hong Kong have often found it difficult to appreciate

the distinction between insurance premia and such annual contributions to linked

schemes which only have a modicum of life cover linked with them.

'Thirdly, schemes linking life assurance and investment have also posed

considerable problems for the Commissioner of Inland Revenue. He has found it

difficult to identify whether the policies were predominantly for investment

or insurance. In addition, where satisfaction was given as to the life

insurance element, he had difficulty in identifying the capital sum assured.

Another problem lay in the fact that many of the premiums were paid in currencies

other than the Hong Kong dollar and payments had to be made on specified dates

which could be annually, quarterly or monthly. If taxpayers showed their

actual Hong Kong dollar cost of purchasing foreign currency then this was the

figure allowed, but in many cases the taxpayers simply reported the amount of

foreign currency paid leaving the job of conversion to the Inland Revenue

Department giving rise to subsequent arguments as to the actual rate used for

the calculations. In fact, it was often doubtful if premia were paid out of

Hong Kong income at all.

/Finally,