XN000022-1975-05-02 — Page 5

FRIDAY, MAY 2, 1975

HIGHER RATES FOR SUBSIDISED QUARTERS PROPOSED

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TWO DIRECT TAX INCREASE PROPOSALS ANNOUNCED BY THE FINANCIAL SECRETARY IN HIS LUDGET SPEECH ARE TO BE IMPLEMENTED WITH RETROSPECTIVE EFFECT AS FROM APRIL 1 THIS YEAR UNDER AN AMENDING BILL GAZETTED TODAY (FRIDAY).

THE FIRST PROPOSAL CONCERNS THE VALUE, FOR SALARIES TAX PURPOSES, OF QUARTERS PROVIDED BY AN EMPLOYER FOR HIS EMPLOYEES AND THE OTHER RELATES TO CORPORATION PROFITS TAX.

UNDER THE INLAND REVENUE (AMENDMENT) (NO. 3) BILL 1975 WHICH WILL BE INTRODUCED SHORTLY INTO THE LEGISLATIVE COUNCIL THE RATE USED IN ASSESSING THE VALUE OF FREE OR SUBSIDISED QUARTERS PROVIDED FOR AN EMPLOYEE BY HIS EMPLOYER WILL BE RAISED FROM THE PRESENT 7-1/2 PERCENT OF THE EMPLOYEE'S INCOME TO 10 PERCENT.

THE INCREASE IS MADE ON THE GROUND THAT THE TRUE MARKET VALUE OF SUCH RESIDENCE IS INVARIABLY ABOVE 7-1/2 PER CENT OF THE EMPLOYEE'S INCOME.

AT THE SAME TIME, THE BILL PROVIDES FOR PROPORTIONATE INCREASES FOR PERSONS OCCUPYING HOTEL, HOSTEL, BOARDING-HOUSE OR OTHER ACCOMMODATIONS.

IF PUT INTO EFFECT, THIS TAX PROPOSAL IS EXPECTED TO YIELD TO THE REVENUE SOME $3.5 MILLION A YEAR.

THE BILL ALSO STIPULATES THAT FREE OR SUBSIDISED QUARTERS PROVIDED FOR EMPLOYEES BY A PERSON ASSOCIATED WITH THE EMPLOYER WILL ALSO BE VALUED SIMILARLY FOR THE PURPOSES OF SALARIES TAX.

THIS PROVISION SEEKS TO FORESTALL ANY EVASION OF ASSESSMENT WHICH IS NOW COMMONLY PRACTISED. UNDER EXISTING LAW, ONLY A PLACE OF RESIDENCE PROVIDED DIRECTLY BY AN EMPLOYER IS SUBJECT TO CHARGE AS A RESULT AVOIDANCE OF ASSESSMENT IS ACHIEVED BY ENSURING THAT' ONE PERSON PAYS THE EMPLOYEE'S SALARY WHILE AN ASSOCIATED CORPORATION PROVIDES THE FREE QUARTERS.

THE AMENDING LEGISLATION ALSO PROVIDES FOR AN INCREASE IN THE RATE OF CORPORATION PROFITS TAX FROM THE CURRENT 15 PERCENT TO 16-1/2 PERCENT STARTING FROM APRIL 1 THIS YEAR.

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IT IS ENVISAGED THAT THE INCREASE WILL BE A TEMPORARY MEASURE PENDING DETAILED CONSIDERATION AND DRAFTING OF LEGISLATION FOR A DIVIDENDS WITHHOLDING TAX.

THE ONE-AND-A-HALF-PERCENT TAX INCREASE SHOULD PRODUCE $100 MILLION IN 1975-76.

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