XN000022-1984-06-22 — Page 2

FRIDAY, JUNE 22, 1984

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CHANGES TO TAX HOLD-OVER POLICY PROPOSED

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THE GOVERNMENT HAS PROPOSED TO MODIFY THE PRESENT ARRANGEMENTS FOR PERMITTING PAYMENTS OF TAX TO BE HELD OVER PENDING THE RESULTS OF AN OBJECTION OR APPEAL.

DISCLOSING THIS TODAY, A GOVERNMENT SPOKESMAN POINTED OUT THAT THE PROPOSAL, SPELT OUT IN THE INLAND REVENUE (AMENDMENT) (NO. 2) BILL 1984 PUBLISHED IN THE GOVERNMENT GAZETTE, IS AIMED AT THWARTING ATTEMPTS TO USE THE OBJECTION OR APPEAL PROCEDURE AS A TAX DEFERRAL DEVICE.

THE AMOUNT OF TAX HELD OVER IN SUCH CASES WAS ENORMOUS, INCREASING FROM $891 MILLION AS AT MARCH 31, 1981 TO $2 984 MILLION AS AT MARCH 31, 1984, HE NOTED.

EXPLAINING THE BACKGROUND TO THE PROPOSAL, THE SPOKESMAN SAID THE INLAND REVENUE ORDINANCE PROVIDES THAT TAX SHOULD BE PAID NOTWITHSTANDING ANY NOTICE OF OBJECTION OR APPEAL, UNLESS THE COMMISSIONER OF INLAND REVENUE ORDERS THAT PAYMENT OF TAX OR PART OF IT BE HELD OVER PENDING THE RESULT OF SUCH OBJECTION OR APPEAL.

HISTORICALLY IT HAS ALWAYS BEEN THE PRACTICE OF THE INLAND REVENUE DEPARTMENT TO PERMIT HOLD-OVER OF SUCH TAX, UNLESS THE DISPUTE IS CONSIDERED TO BE FRIVOLOUS OR TO HAVE LITTLE MERIT OR IF THERE ARE CIRCUMSTANCES WHICH MAY WITH DELAY AFFECT THE ULTIMATE COLLECTION OR RECOVERY OF THE TAX. THIS RATHER RELAXED PRACTICE IS NOW OPEN TO ABUSE.

+DURING THE PAST YEAR, THE DEPARTMENT HAS BEEN TAKING A MUCH TOUGHER STANCE IN RELATION TO REQUESTS FOR TAX TO BE HELD OVER AND AS A RESULT THE TOTAL TAX HELD OVER AT MARCH 31, 1984 WAS ONLY FRACTIONALLY HIGHER THAN A YEAR EARLIER. NONETHELESS, THE SUMS STILL REMAIN VERY LARGE INDEED AND IT IS THEREFORE PROPOSED TO DISCONTINUE THE PRESENT GENEROUS HOLD-OVER POLICY, THE SPOKESMAN NOTED.

THE BILL, THE SPOKESMAN SAID, PROPOSES TO PERMIT THE COMMISSIONER OF INLAND REVENUE TO REQUIRE THE APPELLANT TAXPAYER TO PURCHASE TAX RESERVE CERTIFICATES OF AN AMOUNT EQUAL TO THE TAX TO BE HELD-OVER.

IN THE EVENT OF A SUCCESSFUL OBJECTION OR APPEAL, THE TAXPAYER WOULD BE ENTITLED TO INTEREST ON THE CERTIFICATES- OTHERWISE THE CERTIFICATES WOULD BE USED IN SETTLEMENT OF THE TAX HELD OVER WITHOUT PAYMENT OF INTEREST.

IF THE PROPOSAL IS ACCEPTED, IT IS EXPECTED THAT IN MOST CASES, THE COMMISSIONER WILL ORDER HOLD-OVER OF TAX IN DISPUTE ONLY IF TAX RESERVE CERTIFICATES ARE PURCHASED..

THE BILL IS SCHEDULED TO BE INTRODUCED INTO THE LEGISLATIVE COUNCIL ON JUNE 27 AND TO COMPLETE THE REMAINING LEGISLATIVE PROCEDURES ON JULY 11.

ANYONE WHO WISHES TO COMMENT ON THE PROVISIONS OF THE BILL MAY WRITE TO UMELCO AT SWIRE HOUSE, 12TH FLOOR, CHATER ROAD, CENTRAL, OR TO THE COMMISSIONER OF INLAND REVENUE AT WINDSOR HOUSE, 311 GLOUCESTER ROAD, CAUSEWAY BAY, HONG KONG.

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