TNAG-1483-FCO40-2037-Economic-situation-in-Hong-Kong-1986 — Page 103

INTRODUCTION

Theit of the accounts of the Hong Kong Government is carried out under the terms of the Audit Ordinance, which prov for the appointment, tenure of office, duties and powers of the Director of Audit, for the submission of annual statements by the Director of Accounting Services, for the examination and audit of those statements by the Director of Audit, and for the submission of his report thereon to the Governor as the President of the Legislative Council. The statements required by Section 11 to be rendered by the Director of Accounting Services have been examined and audited in accordance with the Ordinance.

2. Scope of Audit. My audit is conducted in accordance with a programme of work which is determined annually and which is intended to provide an overall assurance of the general accuracy and propriety of the Government's financial and accounting transactions and not to disclose each and every accounting error or financial irregularity. With the considerable volume and variety of Government revenue and expenditure, this examination of accounts is of necessity carried out by means of selective test checks and in-depth reviews designed to indicate possible areas of weakness, reliance for detailed checks on the regularity of the accounts being placed largely on the systems of internal control operated by individual departments.

HONG KONG GOVERNMENT

STATEMENT OF ASSETS AND LIABILITIES

3. Deposits. Satisfactory analyses and/or reconciliations have not yet been rendered in respect of the following

accounts:

Deposits

Engineering Development Department:

Private Works, Highways, Hong Kong

London Office:

Pensions Superannuation

$24,575,361.24

$33,308.97

STATEMENT OF RECEIPTS AND PAYMENTS

REVENUE

4. Arrears of Revenue. As at 31 March 1986 arrears of revenue were reported as totalling $2,543 million of which $1,276 million was listed as still outstanding at 30 June 1986. The decrease in the arrears at the latter date below the corresponding figure in the previous year represented a fall of 15%.

5. The major constituents of the arrears of $1,276 million at 30 June 1986 related to-

6.

Internal Revenue

Fixed Penalty System (Traffic Contraventions and Criminal Proceedings)

$1,168 million

$43 million

The arrears of $1,168 million relating to Internal Revenue reflect a decrease of $159 million below the reported arrears at 30 June 1985. Of the amount of $1,168 million, $1,126 million related to earnings and profits tax representing a decrease of 10% in respect of the corresponding figure in the previous year. The greater part of the arrears of earnings and profits tax was attributable to the substantial amount of profits tax in default, caused in part by the tight liquidity situation being experienced by some businesses and more particularly by the financial difficulties of a number of real estate companies and related enterprises in the previous years. About 59% of the arrears of earnings and profits tax relate to tax due in 1984-85 and before. The 41% of the arrears of earnings and profits tax which relate to tax due in 1985-86 totalled $460 million, and is an improvement over the corresponding figure in the previous year.

7. The arrears as at 31 March 1986 relating to the Fixed Penalty System (Traffic Contraventions and Criminal Proceedings), which still remained outstanding at 30 June 1986 including the associated court costs, stood at $43 million, compared with $93 million as at 30 June 1985. The fall is due to:

--the write-off of $55 million approved by the Finance Committee of the Legislative Council in May 1986 in respect of outstanding debts and court costs for the period from 1 April 1981 to 31 March 1984 prior to the introduction of the amending legislation in April 1984;

-an improvement in the collection rate since April 1984; and

-a decrease in the number of fixed penalty tickets issued since 1984.

The objectives of the amending legislation introduced in April 1984 were to induce earlier payment of fixed penalty fines, thereby reducing the need to resort to summons action; to reduce the number of unnecessary summonses by placing the

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