TNAG-1415-FCO40-1896-Public-finance-in-Hong-Kong-1985 — Page 164

fee paid in 1984-85 was $5.3 million which may be reduced by about $500,000 after certain interest recoveries have been agreed with the aircraft operators. Early in 1985, I carried out a review of the efficiency of the air passenger departure tax collection system and concluded that the system was cumbersome, complex and expensive, a situation brought about by a failure to follow previous intentions.

126.

The first variation to the original intentions was the decision of the Director of Civil Aviation to inform the aircraft operators in March 1983 that they would be paid a fee to cover the estimated full cost of collecting the tax, apparently overlooking the previous intention that the fee would be based on estimated cost less the interest benefit from the tax collected. Having committed himself to paying a fee based on the full cost of collecting the tax, the Director of Civil Aviation informed the operators three months later, in June 1983, that the interest on the tax collected would have to be taken into account after all, which in effect meant that it would have to be refunded to the Government even though the Ordinance permitted the operators to retain it. This complicated the tax collection arrangements because it became necessary to assess the interest earned on the tax by each operator. Not surprisingly, some operators did not fully co-operate with this arrangement and it became difficult for the Director of Civil Aviation to collect the interest that he claimed, particularly as the Government had no legal authority to do so, in contrast to the legal authority it possessed to fix the level of the fee. During the next two years the Director negotiated with the aircraft operators to find a solution to the problem and in May 1985 it was agreed between the parties that the operators would forgo their right to retain the tax money for the period permitted by the Ordinance and deposit the daily tax collections in a Government bank account. The Director of Civil Aviation has informed me that it is the intention that the Ordinance should be amended in due course to require the operators to comply with these direct banking arrangements.

127.

The second variation to the original intentions was the decision, made with the aim of securing the co-operation of the aircraft operators, to abandon the simple formula and devise a more complicated and administratively more costly one which involved the fixing of different fees based on the estimated costs of each individual operator. This arrangement is now regarded by the Deputy Crown Solicitor as a requirement under the Air Passenger Departure Tax Ordinance. This meant that the Director of Civil Aviation had to examine the estimates submitted by each operator, a task that was made more difficult by the absence, in some instances, of proper criteria for determining whether the estimates were reasonable.