XN000022-1975-01-22 — Page 12

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WEDNESDAY, JANUARY 22, 1975

REVISED PROFITS TAX BILL PASSED IN LEGCO

BILL SERVES BALANCED INTERESTS OF COMMUNITY - SAY UNOFFICIALS

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THE LEGISLATIVE COUNCIL TODAY PASSED, WITH CERTAIN AMENDMENTS, THE INLAND REVENUE (AMENDMENT) (NO. 3) BILL WHICH CHANGES THE METHOD OF COMPUTING PROFITS TAX FROM A PRECEDING YEAR TO A CURRENT YEAR BASIS, IN LINE WITH OTHER TAXES.

THE AMENDMENTS FOLLOW RECOMMENDATIONS FROM THE UNOFFICIAL MEMBERS AFTER 'A LONG AND INTENSIVE STUDY OF PUBLIC REPRESENTATIONS TO THE GOVERNMENT, UMELCO AND IN THE PRESS.

THE MOST IMPORTANT CHANGES ARE

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INITIAL ALLOWANCE WILL BE GRANTED FOR THE HIGHER CAPITAL EXPENDITURE OF THE TRANSITIONAL YEARS, INNESPECTIVE OF WHICHEVER YEAR'S PROFIT IS DROPPED OUT. 1.6. WHERE TRANSITIONAL ADJUSTMENT APPLIES AND 1974/75 IS THE YEAR OF HIGHER PROFITS, INITIAL ALLOWANCE WILL DE GRANTED ON THE HIGHER OF CAPITAL EXPENDITURE IN 1974/75 on 1973/74 WHICH WOULD BE THE DROP-OUT YEAR. WHERE TRANSITIONAL ADJUSTMENT DOES NOT APPLY AND 1974/75 IS THE DROP-OUT YEAR, THE HIGHER OF THE CAPITAL EXPENDITURE IN 1974/75 OR 1975/76 WILL BE TAKEN FOR THE PURPOSES OF INITIAL ALLOWANCE FOR THE YEAR OF ASSESSMENT 1975/76.

A BUSINESS WILL BE ABLE TO APPLY FOR PART OR THE WHOLE PROVISIONAL TAX TO BE HELD-OVER IF ITS CURRENT YEAR PROFITS ARE LESS THAN SO PER CENT (INSTEAD OF 80 PER CENT AS ORIGINALLY PROPOSED) OF THE PRECEDING YEAR'S PROFITS. THE NEW CRITERION FOR STAND-OVER OF PROVISIONAL TAX WILL ALSO BE EXTENDED TO SALARIES TAXPAVERS.

A CHANGE IN ADMINISTRATIVE PROCEDURES TO ENABLE BUSINESSES CLOSING THEIR ACCOUNTS BETWEEN JANUARY AND MARCH TO PAY THE PROVISIONAL TAX IN TWO INSTALMENTS - THE FIRST OF 75 PER CENT ON THE NORMAL DUE DATE, AND THE SECOND ABOUT THREE MONTHS LATER. THE SAME FACILITY WILL APPLY TO SALARIES TAXPAYERS.

IN OUTLINING THE CHANGES, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, TOLD COUNCIL THAT IF ALL TAXPAYERS" TOOK ADVANTAGE OF THIS INSTALMENT FACILITY, THE ONCE-OVER COST TO THE REVENUE IN 1975/76 WOULD BE ABOUT $200 MILLION.

HE ADDED: +1 PROPOSE TO FINANCE THIS SHORTFALL BY TEMPORARILY DRAWING DOWN THE RESERVES, AND I STRESS TEMPORARILY.+

HE SAID THERE WOULD BE A RECURRING LOSS OF SOME INTEREST ON HONG KONG'S BALANCES AND A PERMANENT RE-SCHEDULING OF OUR CASH FLOW, BUT THE LATTER EFFECT WAS NOT UNWELCOME.

THE FINANCIAL SECRETARY MADE IT CLEAR THAT IF THERE WAS ABUSE OF THE MONE GENEROUS CRITERION FOR STAND-OVER OF PROVISIONAL TAX. HE WOULD NOT HESITATE TO CONSIDEN INTRODUCING

PENALTIES.

AT THE REQUEST