XN000022-1995-10-18 — Page 46

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Tax Reserve Certificates (Amendment) Bill

Following is the speech by the acting secretary for Treasury, Mr Alan Lai, in moving the second reading of the Tax Reserve Certificates (Amendment) Bill 1995 in the Legislative Council today (Wednesday):

Mr President,

I move that the Tax Reserve Certificates (Amendment) Bill 1995 be read a second time.

Under our salaries tax system, tax is not deducted from income when it is earned and a taxpayer will not have to pay salaries tax, which is assessed on a provisional basis, until at least nine months after the start of the tax year in which the income is earned. The advantage of this system is that taxpayers have the use of their money during the intervening period but the disadvantage is that some taxpayers may not have set aside sufficient funds to pay their tax and therefore face financial difficulties when the tax bill is due. We therefore see merit in encouraging and facilitating taxpayers to save for their tax bills.

The Bill now before Members seeks to introduce a voluntary Pay-As-You-Earn scheme ( or PAYE scheme in short). It will initially be open only to civil servants on a trial basis. The scheme will provide a more convenient and automatic saving alternative for the payment of tax bills.

Under the scheme, a civil servant may elect to authorise the Treasury to deduct from his salary a specified amount each month for the purchase of Tax Reserve Certificates. The Inland Revenue Department will credit each payment received for the purchase to an account held in the applicant's name. To make it more convenient to prospective users and to minimise the cost involved, the scheme will operate in a paperless way whereby no Tax Reserve Certificate will need to be issued for the purchase. Interest will be earned in the normal way as for the purchase of ordinary Tax Reserve Certificates. The accumulated amount in the account will be used to settle the applicant's tax liability on its due date and any surplus will be carried forward.