Sir,
UMELCO
DRAFT SPEECH BY HON PETER POON, MBE, JP LEGISLATIVE COUNCIL 30.4.1986
Inland Revenue (Amendment) (No.2) Bill 1986
I rise to support the Inland Revenue (Amendment) (No.2)
Bill 1986 which, inter alia, repeals the Inland Revenue (Amendment) Ordinance 1984 regarding the taxation of the so-called 'off-shore interest' under Profits Tax.
In any legislation, there are three important aspects. The spirit or intention of the legislation, the wording of the legislation and the administration or application of the legislation. However, in tax legislation, the strict interpretation of the law is applied. Therefore, although the intention of Government in passing the 1984 legislation in March 1984 was to prevent loss of revenue, the wording of some of the new provisions, if strictly interpreted, would go much further than what was originally envisaged. This has created uncertainty in its application to certain cases.giving cause for serious concern whether Hong Kong's 'territorial source' tax concept is being breached. The Inland Revenue Departmental Interpretation and Practice Note No. 13 issued in September 1984 has in fact further increased such concern, especially by its reference to the 'mind and management' concept which is more relevant to the ' residence' basis of taxation than to our 'territorial source'
basis of taxation.
It was with these concerns in mind that the UMELCO Ad
Hoc Inland Revenue Review Panel was formed in July last year to study the recent tax law changes. Having critically examined the numerous representations received from interested parties and having carefully considered the effects the 1984 Amendment Ordinance might have on the business community, the Panel
recommended the repeal of the provisions relating to tax on
UMELCO
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