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Head 3-Internal Revenue
Of the three small subheads 'Business registration fees', 'Entertainment tax' and 'Hotel accommodation tax' the first two recorded significant variations from the estimate: the shortfall of $3,637,350 or 12.2% under 'Business registration fees' was due partly to a reduction in the number of new businesses being registered and an increase in the number of registrations cancelled and partly to an increase in fee arrears: in the case of ‘Entertainment tax' there was a shortfall of $6,155,543 or 24.7% due to an over-estimation of the amount of revenue to be derived from the re-introduced tax on cinema admissions. One of the major subheads 'Earnings and profits tax' also recorded a shortfall $12,951,931 or 0.6% made up as follows:
Shortfall:
Salaries tax
Personal assessment
Interest tax
Property tax
...
$ 73.4 million (14% less than the estimate) $ 14.5 million (43% less than the estimate) $ 30.9 million (22% less than the estimate) $ 60.3 million (29% less than the estimate)
$179.1 million
ginal
rtfall
imate
%
0.57
0.46
4.61
74.12
5.84
0.37
3.75
3.96
5.67
2.99
10.14
14.62 7.39
10.61 17.97
/ere:
less.
quor .1%)
aber,
uced 5,004 1 for
Less excess:
Corporation profits tax Business profits tax
Net shortfall
154.5 million (13% more than the estimate) 11.6 million ( 7% more than the estimate)
$ 13.0 million
In the case of Corporation and Business profits tax the original estimates were over-pessimistic as to the effects on business profitability of the general down-turn in the economy; in fact the effects proved to be mainly confined to particular industries (notably textiles) and many businesses showed improved profits. The substantial decrease in the yield from Salaries tax was mainly attributable to the fact that the original estimate included tax of approximately $100 million which under the new two-instalment payment arrangement did not become due until after 31st March, 1976. The shortfall on Personal assessment arose as a result of the changeover from a preceding year to an actual year basis for business profits; administratively it proved extremely difficult to assess to personal tax on a provisional basis and it was decided to defer personal assessments in a large number of cases until actual profits were known. The decrease in the yield from Interest tax was almost entirely due to the fall in prime interest rates which occurred in March 1975 and the low interest rates which prevailed thereafter throughout the year. The substantial decrease in the yield from Property tax was almost entirely due to an under- estimation of the amount of tax to be discharged in respect of owner-occupation, vacancies and corporations exemptions. All of the remaining major subheads yielded more than anticipated. In the case of ‘Bets and sweeps tax' the excess of $41,754,072 or 34.9% was due to the further extension of off-course betting facilities and to the introduction of new forms of multiple betting and lotteries conducted by the Hong Kong Lotteries Board. The yield from 'Estate duty' which is extremely difficult to estimate was $24,626,845 or 61.6% greater than anticipated partly because there was no significant reduction in the number of new large estates despite the fall in asset values, and partly because duty was still being recovered in respect of deaths which occurred when values, particularly share values, were high. 'Stamp duties' recorded a substantial excess of $84,613,680 or 28.4% due to the strength and duration of the revival in the property and stock markets; and in particular to the prolonged period of high turnover in shares which marked the later months of the year.
Head 4-Motor Vehicle Taxes
Of the two subheads 'Commonwealth preference' tax and 'First registration' tax only the second recorded a significant variation from the estimate; the excess on this subhead $21,122,319 (150.9%) was mainly due to an increase over the previous year in the number of vehicles registered and to an upwards revision of the tax rate for private cars, motor cycles and public cars from 15% to 30% in December 1975.
Head 5---Fines, Forfeitures and Penalties
There were significant variations from the estimates on three of the four subheads. Revenue from ‘Fines' exceeded the estimate by $5,259,040 (19.5%) mainly because of an increase in the number of cases brought before the courts and the heavy fines ordered by the Judiciary. Forfeitures exceeded the estimate by $1,064,609 (25.3%) also because of the increased number of cases handled, especially in respect of illegal gambling and off course betting where money was confiscated. There was a shortfall of $3,402,013 (20%) under 'Penalties—fixed penalty scheme' due mainly to over-estimation at the time when the forecast was prepared.
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