XN000022-1986-02-26 — Page 30

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WEDNESDAY, FEBRUARY 26, 1986

*CLEARLY, THIS STAMP DUTY CHARGE IS HAVING AN INHIBITING EFFECT ON THE RAISING OF CAPITAL THROUGH THE ISSUE OF BONDS DENOMINATED IN HONG KONG DOLLARS, SIR JOHN SAID.

IF THE PROPOSED AMENDMENT ENCOURAGED THE ISSUE OF CORPORATE BONDS BY HONG KONG AND FOREIGN COMPANIES, THE REVENUE COULD EXPECT TO GAIN EVENTUALLY FROM THE ADDITIONAL PROFITS AND SALARIES TAX FLOWING FROM THE INCREASED ACTIVITY IN HONG KONG'S FINANCIAL SECTOR, HE SAID.

+FURTHERMORE, THE EXISTENCE OF MORE BONDS DENOMINATED IN HONG KONG DOLLARS SHOULD ENCOURAGE THE GROWTH OF SECONDARY MARKETS, THUS ENHANCING THE STATUS OF HONG KONG AS A MAJOR FINANCIAL CENTRE, SIR JOHN SAID.

AS FOR ESTATE DUTY, SIR JOHN PROPOSED THAT THE WORDING OF THE ORDINANCE BE AMENDED TO ENSURE THAT THE EXEMPTION WOULD APPLY IN ALL CASES WHERE THERE WAS BOTH A PRINCIPAL MATRIMONIAL HOME AND A SURVIVING SPOUSE.

HE SAID THAT LEGISLATION ENACTED EARLIER EXEMPTED FROM DUTY A PRINCIPAL MATRIMONIAL HOME WHICH HAD BEEN PASSED TO THE SURVIVING SPOUSE UNDER A WILL OR BY OPERATION OF LAW.

HOWEVER, IN SOME CASES WHERE A PERSON DIED INTESTATE, THE SURVIVING SPOUSE HAD NO RIGHT TO THE MATRIMONIAL HOME, CONSEQUENTLY THE EXEMPTION AVAILABLE UNDER THE EXISTING LEGISLATION COULD NOT APPLY.

THE COST OF THIS PROPOSAL WOULD BE ABOUT $8 MILLION IN 1986-87, HE SAID.

HE SAID THAT HE HAD CONSIDERED SUGGESTIONS THAT THE ESTATE DUTY ORDINANCE MIGHT BE FURTHER AMENDED IN A NUMBER OF WAYS, BUT AFTER CAREFUL EXAMINATION HAD FOUND THE PROPOSALS UNACCEPTABLE AS THEY HAD SERIOUS DRAWBACKS.

+THE IMPLEMENTATION OF ALL OR ANY OF THE CHANGES WOULD BE VERY COSTLY TO THE REVENUE, + SIR JOHN SAID,

+ IN ADDITION THEY WOULD COMPLICATE OUR TAX SYSTEM FURTHER AND WOULD BE DIFFICULT TO ADMINISTER.

THE PRESENT EXEMPTION LEVELS, SIR JOHN SAID, WERE GENEROUS AND THE RATES WERE LOW BY ANY STANDARDS.

IN MANY CASES, BECAUSE DIVIDENDS AND INCOME WITH A SOURCE OUTSIDE HONG KONG WERE NOT CHARGEABLE TO PROFITS TAX, ESTATE DUTY WAS THE ONLY DIRECT TAX WHICH SOME HONG KONG RESIDENTS WOULD EVER PAY.

+ESTATE DUTY IS THEREFORE A WAY OF ENSURING THAT SOME OF THOSE ABLE TO AFFORD IT MAKE AT LEAST ONE CONTRIBUTION TO THE EXCHEQUER,+ SIR JOHN SAID,

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