ENG-1968 — Page 65

FINANCIAL STRUCTURE

RATES

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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 those parts of the New Territories which are statutorily subject to rates, the charge is 11 per cent. The valuation list is prepared by the Com- missioner of Rating and Valuation and is frequently revised to bring it up to date. Revenue from rates has more than doubled over the last six years. The estimate for 1968-9 is $300 million.

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 of either 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measure and no attempt was made to collect tax after the liberation of the Colony, although the ordinance was not repealed until 1947.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 earn- ings 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 to Hong Kong or not. The ordinance aims at simplicity and charges tax generally at source and at a flat rate rather than in the hands of the eventual recipients 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-Property Tax, Salaries Tax, Profits Tax and Interest Tax. A fifth and aggregate tax known as Personal Assessment is chargeable on people who so elect. In that case, the individual's income, otherwise chargeable to the four separate taxes (but excluding Profits Tax in corporations), is aggregated in a single sum which is reduced by personal allowances and tax charged on