TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 61

127.

I propose to introduce these new concessions with

effect from the year of assessment commencing 1 April 1987. The

first occasion on which they will apply, therefore, will be to

provisional and final salaries tax assessments for the fiscal

Personal Assessments.

I

year 1987-88, and also to 1987-88

estimate that the cost to the revenue in 1987-88 will be about

$470 million, and for a full year, $650 million.

Profits Tax

128.

As to profits tax, I propose a reduction in the rate of

tax on corporate profits from 18 1/2% to 18%. The cost of the

reduction proposed is $135 million in 1987-88 and, for a full year, $310 million.

The new corporate rate of 18% will apply to

provisional and final assessments for 1987-88.

129.

I do not

I am aware that some have argued for a more substantial

cut in the rate of corporate profits tax on the ground that this

would provide a stimulus to the business sector.

consider that we should move too sharply at this stage. But I

hope that this clear indication of the direction in which I

would like to move will provide, if not a stimulus to the corporate sector, then at least sound reason for confidence that

we remain determined to maintain a low tax regime in

in which

business can flourish. Gentle progress will serve us best.

Reduction in Standard Rate

130.

The reduction proposed in the standard rate will affect

the amount of profits tax to be paid by unincorporated businesses, and reduce yields from property tax and interest

tax. Taken together, I estimate this will cost a further

$35 million in 1987-88 and $75 million in a full year. The new

standard rate will apply to provisional and final assessments

for 1987-88 on unincorporated businesses, to provisional and

final assessments for 1987-88 in respect of property tax, and

also to final interest tax assessments for that year.

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/Estate

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