XN000022-1978-04-13 — Page 4

THURSDAY, APRIL 13, 1978

+THE REMAINING 5,100 WOULD NOT HAVE BENEFITED BECAUSE THEY AND THE IR HUSBANDS WERE ALREADY ON THE STANDARD RATE OF TAX OF 15 PER CENT.

+THESE PROPORTIONS ARE NOT MATERIALLY DIFFERENT FROM THOSE DISCLOSED FOR 1972-73, THAT IS THE LAST YEAR FOR WHICH A WORKING WIFE ALLOWANCE WAS GRANTED, HE SAID.

ON TAXATION TREATMENT OF INTEREST, MR. HADDON-CAVE SAID HAVING REGARD TO THE POSSIBLE EFFECT ON THE COST OF BORROWINGS BY HONG KONG BUSINESS, THE GOVERNMENT DECIDED NOT TO ACCEPT THE THIRD INLAND REVENUE ORDINANCE REVIEW COMMITTEE'S RECOMMENDATION RELATING TO SUCH TAXATION TREATMENT GENERALLY OR A VARIANT OF IT.

+THAT IS TO SAY, THE GOVERNMENT DECIDED NOT TO REINFORCE THE EXISTING CHARGE ON INTEREST AS SUCH BY EXTENDING THE TERRITORIAL SOURCE CRITERION SO AS TO TAX INTEREST RECEIVED ON FUNDS USED BY BORROWERS TO PRODUCE PROFITS CHARGED TO HONG KONG TAX (UNLESS, OF COURSE, THE INTEREST IS ALREADY BEING TAXED UNDER THE PROVISION OF CREDIT TEST).+

FINANCIAL SECRETARY EXPLAINS NEED FOR REVISION

OF WATER CHARGES

*****

THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, EXPLAINED IN THE LEGISLATIVE COUNCIL TODAY WHY A REVISION OF WATER CHARGES IS INEVITABLE BY OUTLINING THE POSITION OF THE WATERWORKS ACCOUNTS WITH REGARD TO OPERATING COSTS, CURRENT WATER CHARGES AND THE CONTRIBUTIONS FROM RATES AND GENERAL REVENUE,

SUMMING UP THE BUDGET DEBATE, MR. HADDON-CAVE SAID ON PRESENT COSTS, OPERATING EXPENDITURES ARE ESTIMATED TO BE $634 MILLION IN 1977-78, BASED $705 MILLION IN 1978-79, AND TO TOTAL $2,207 MILLION OVER THE THREE YEAR FORECAST PERIOD, 1979-80 TO 1981-82.

BUT HE SAID THAT ON THE BASIS OF CURRENT WATER CHARGES AND THE CONTRIBUTIONS FROM RATES AND GENERAL REVENUE, INCOME IS ESTIMATED TO BE $433 MILLION IN 1977-78, 3457 MILLION IN 1978-79, AND TO TOTAL $1,810 MILLION OVER THE FORECAST PERIOD. THE CONTRIBUTION FROM RATES IS AT PRESENT SET AT TWO PER CENT OF THE RATEABLE VALUE AND, FOR 1978-79, IS ESTIMATED TO BE $201 MILLION.

THE FINANCIAL SECRETARY POINTED OUT: +IF THE PRESENT CHARGES ARE MAINTAINED, AND EVEN ON THE BASIS OF THE CONSERVATIVE CALCUATION OF COSTS, THE WATERWORKS ACCOUNTS WILL BE IN DEFICIT TO THE TUNE OF $200 MILLION IN 1977-78 AND $250 MILLION IN 1978-79, WITH DEFICITS OVER THE FORECAST PERIOD TOTALLING $400 MILLION.+

/HE ADDED: