XN000022-1996-11-13 — Page 14

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First, to improve operation of the first registration tax system. Under the Bill, we seek to provide clear definitions in law so as to minimise uncertainty and disputes in tax assessment work. To strengthen enforcement, the Bill includes provisions to allow Customs officers to enter the non-domestic premises of a registered vehicle importer or distributor at a reasonable time to inspect motor vehicles for tax assessment purposes. The time limit within which legal proceedings against offences under the legislation can be initiated will also be extended from six months to two

years

after the date on which the offence is committed or six months after the date on which the Commissioner for Transport first has knowledge that the offence has been committed, whichever is earlier.

The Bill also provides that all costs incurred in relation to the importation of a vehicle have to be declared in the import return and taken into account in the calculation of first registration tax. This seeks to ensure that vehicles imported for personal use are taxed on the same basis as those imported by registered operators for trade purposes. To further provide a level playing field, resale of vehicles originally imported for personal use may also be subject to additional first registration tax where appropriate, on the same basis as the existing arrangement for vehicles imported for trade purposes. On equity grounds, the Bill also provides that depreciation would be allowed in respect of the taxable value of a vehicle which is registered in a place outside Hong Kong by an importer before its importation into Hong Kong for personal use. This is in line with the present arrangement whereby depreciation allowance is provided for vehicles which have been legally used in Hong Kong before first registration.

Second, to facilitate trade operation. We seek to improve the system for filing import return. The Commissioner for Transport will allow flexibility for late submission of import return under special circumstances and upon application by the importer. Moreover, under the Bill, the filing requirement will no longer apply to special vehicles used in the airport, cargo terminals or construction sites. These vehicles are not subject to first registration tax but they are caught by the filing provisions under existing law. The Bill also includes provisions for currency

conversion to facilitate the trade in their declaration work.

Third, to tackle tax evasion. We also identify in the review that some vehicle traders provide distributor's warranty, which is currently not subject to tax, on a mandatory basis to buyers and seek to manipulate the price structure of vehicles so as to reduce the first registration tax payable. The Bill seeks to plug this loophole by stipulating that the value of any warranty provided on a mandatory basis will be subject to first registration tax.