TNAG-1449-FCO40-1953-Minutes-and-Hansards-of-the-Legislative-Council-of-Hong-Kong-1986 — Page 270

I

Hon Mrs Rita FAN

Question 16

Written Reply

Given the fact that passage and baggage allowancè provided by employers to employees are explicitly exempted from taxation, and in the light of the comments made by the Third Inland Revenue Ordinance Review Committee on medical benefits (see Para 139-141 of the Report), can the Government inform this Council:

(a)

(a)

What is the Government's policy on taxing medical benefits provided by employers as income from employment?

(b)

What is the rationale for differentiation between medical benefits and passage/ baggage allowance?

(c)

Will the Government consider treating medical benefits on the same basis as passage and baggage allowance?

REPLY BY THE HONOURABLE THE FINANCIAL SECRETARY IN LEGISLATIVE COUNCIL ON WEDNESDAY 12 MARCH 1986

In principle an employee should be liable to

Salaries Tax not only on his monthly cash remuneration but also on any fringe benefits

he receives from his employer. However, the

administrative difficulties in attempting to

put a value on every benefit received by employees would far outweigh the extra benefit to be.

obtained from assessing such benefits to tax. Against this background the Government has for many years followed the principle established in decided cases in the UK of taxing only

those employee benefits which are received in or are convertible into cash. Consequently, with the exception of the value of quarters provided by employers, benefits in kind are excluded from the charge to Salaries Tax. This policy is applicable to medical benefits provided to employees by their employer.

/Where an

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