ENG-1965 — Page 57

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FINANCIAL STRUCTURE

reduced rates. The rates of duty on table waters and methyl alcohol are 48 cents and $7.50 per gallon respectively.

RATES

Rates are levied on the basis of the annual letting value of land or a building held or occupied as a distinct or separate tenancy. The valuation list covers the rating areas of Hong Kong Island, Kowloon, New Kowloon and part of the New Territories. In Hong Kong Island, Kowloon and New Kowloon rates are charged, with a few exceptions, at 17 per cent per annum of rateable value. In the New Territories the charge is 11 per cent. The valuation list is prepared by the Commissioner of Rating and Valuation and is frequently revised to bring it up-to-date. Revenue from rates has about doubled over the last five years. The estimate for 1965-6 is $192,800,000.

There are few exemptions. Premises used for educational, chari- table and welfare purposes are rated, but most of the bodies running these establishments receive back the amount of rates paid in the form either of direct subventions or contributions toward rates.

INTERNAL REVENUE

Income was first subjected to direct taxation in Hong Kong in 1940 as a temporary war-time measure and no attempt was made to collect tax after the liberation of the Colony, although the ordin- ance was not repealed until 1947. However, a new source of revenue was by then essential and it was decided to impose a direct tax on earnings and profits as a permanent measure. Under the Inland Revenue Ordinance 1950, tax is charged only on income or profits arising in or derived from the Colony. No tax is charged on income or profits arising outside the Colony whether remitted here or not. The ordinance aims at simplicity and to this end charges tax generally at source and at a flat rate rather than in the hands of the eventual recipient on a sliding scale. Thus there is no need to ascertain the total income of each individual.

Income and profits are grouped in four categories, each of which is subject to a separate tax, namely, Property Tax, Salaries Tax, Profits Tax and Interest Tax. A fifth and aggregate tax known