TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 59

124.

Third, that the child allowance be increased, for a

first child from $9,000 to $11,000, and for a second

child from $6,000 to $8,000. The new allowances will

be respectively some 22% and 33% higher than the

present allowances which were set in 1985.

Lastly, that the third band in the Second Schedule of

the Ordinance, that is to say the band to which the 15%

marginal rate of tax presently applies, be widened from

$10,000 to $20,000. This will defer by $10,000 of

income the point at which the 20% rate takes effect

and, at the same time, will increase the income levels

at which taxpayers enter the standard rate zone.

Because an across the board increase in all allowances

would be extremely expensive, I

I further propose that the new additional personal allowances of $5,000 for a single person and $10,000 for a married couple be subject to a 10% clawback (48). By reintroducing the clawback, I am able to focus the proposed

allowances more fully on the less

less affluent of those who pay

salaries tax or elect for personal assessment. The clawback will operate to reduce the allowance by 10% of the amount by

which a taxpayer's income exceeds $34,000 in the case of a

single person and $70,000 for a married couple. Thus, when a

single person's income reaches $84,000 and a married couple's

$170,000, the additional personal allowance will have been exhausted by the clawback (49).

(48) Under the provisions of section 42B (1) (aa) and (bb) of the Ordinance.

(49)

In other words, for every dollar of income in excess of $34,000 for a single person and $70,000 for a married couple, 10 cents of the additional allowance will be recovered, or clawed back, until the allowance is eliminated and at that level of income the taxpayer only enjoys the basic personal allowance.

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