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THURSDAY, DECEMBER 26, 1974.
PROVISIONAL PROFITS TAX SYSTEM EXPLAINED
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THE INTRODUCTION OF THE PROPOSED PROVISIONAL TAX SYSTEM WILL MEAN A MUCH FAIRER TAXATION SYSTEM FOR BUSINESSMEN IN HONG KONG WHEN COMPARED WITH THE PRESENT COMPLICATED AND OFTEN INEQUITABLE METHOD.
THIS WILL BE PARTICULARLY EVIDENT IN CASES WHERE PROFITS ARE FALLING SIGNIFICANTLY A TIME WHEN THE PRESENT SYSTEM CAN BE PARTICULARLY ONEROUS IN TERMS OF TAX PAYABLE.
THE BUSINESSMAN IN THIS SITUATION IS IN A MUCH WORSE POSITION THAN ONE WHOSE PROFITS ARE RISING BECAUSE THE PRESENT METHOD UNFAIRLY BENEFITS THE LATTER.
THE PROPOSED NEW METHOD OF ASSESSMENT WILL, HOWEVER, PLACE DOTH BUSINESSMEN ON THE SAME FOOTING WITH FINAL TAX PAYABLE IN EACH CASE, ALWAYS BEING CALCULATED AT THE STANDARD RATE ON ACTUAL PROFITS.
THE FOLLOWING TABLE ILLUSTRATES THE DIFFERENCES BETWEEN THE FINAL TAX PAYABLE UNDER THE PRESENT METHOD AND THE PROPOSED NEW METHOD :-
OLD METHOD
NEW METHOD
YEAR ACTUAL ENDED PROFIT
FINAL
TAX PAYABLE
TAX PAYABLE
AS PERCENTAGE
FINAL
TAX PAYABLE
TAX PAYABLE
OF ACTUAL
PROFITS
AS
PERCENTAGE OF ACTUAL PROFITS
(1) RISING
PROFITS
1975 $ 80,000
1976 $100,000
$12,000
12.0%
$15,000
15%
1977 $140,000
$15,000
10.7%
$21,000
15%
1978 $200,000 $21,000
10.5%
$30,000
15%
1979 $250,000
$30,000
12.0%
$37,500
15%
(2) FALLING
PROFITS
1975 $250,000
1976 $200,000 $37,500 1977 $140,000 $30,000 1978 $100,000 $21,000 1979 $ 80,000 $15,000
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18.75% $30,000 15% 21.4% $21,000 15% 21.0% $15,000 15% 18.75% $12,000 15%
THE FIGURES
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