TNAG-0788-FCO40-992-Development-of-social-policy-in-Hong-Kong-proposed-contribut-1978 — Page 287

7.9

With this in mind, the Government has considered whether there are any further measures which might be introduced to encourage the growth of occupational benefit schemes. One method would be to introduce further tax incentives. Another would be to introduce controls which would ensure that an employee who changes jobs does not lose his benefits.

7.10

The present tax structure already provides incentives for the development of occupational benefit schemes, particularly retirement benefit schemes. The employer may deduct contributions to a scheme fund when computing his assessable profits, provided he has met the require- ments of the Inland Revenue Ordinance. For the employee, a lump sum

payment on retirement is exempt from salaries tax. The Second and Third Inland Revenue Ordinance Review Committees considered proposals to remove the present provision whereby the deductions to be allowed when computing the assessable profits of an employer, in respect of annual contributions to the scheme's fund, are limited to 15% of the employees remuneration in any year; to allow tax relief on an employee's contributions to a retirement scheme; and to exempt from tax the income of a fund set up under an approved retirement scheme. The reports of the Committees* explain why they did not support these proposals. No doubt, the accept- ance of such proposals would stimulate the development of occupational benefit schemes. But it is felt that if the Government is to make a further financial contribution to social security (which in effect is what such tax concessions would amount to), it would be better to do so in other ways which would benefit all employees. The tax structure of those countries which provide comparable concessions, such as the United Kingdom, is different from that in Hong Kong. Such a tax concession for employees would benefit proportionately fewer people in Hong Kong, because fewer people pay salaries tax, and it would benefit those who are better off and fortunate enough to be a member of a retirement benefit scheme. Accordingly, the Government does not propose any further tax concessions in this field.

*

Report of Second Inland Revenue Ordinance Review Committee (1967)

paras. 131 - 142

Report of Third Inland Revenue Ordinance Review Committee (1977)

paras. 96, 286 - 289

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