ENG-1969 — Page 71

FINANCIAL STRUCTURE

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April 1, 1947. Under the Inland Revenue Ordinance, 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 standard rate of tax was raised to 15 per cent from April 1, 1966 having stood at 124 per cent for the previous 15 years and at 10 per cent before that.

Earnings and profits are classified into four categories each of which is subject to a separate tax-Property Tax, Salaries Tax, Profits Tax and Interest Tax. Property Tax is charged on the net rateable value of any land or building in the Colony, with the exceptions of land or buildings in the New Territories and land or buildings wholly occupied by the owner as his residence; it is payable by the person paying the Rates who, if he is not the owner, can then recover from the owner by deduction from rent or any other money due to him. Interest Tax is charged on the borrower who is required to pay interest to his creditor net after deduction of tax. Dividends are regarded as paid out of taxed profits and exempt from further tax. Salaries Tax and Profits Tax are levied by direct assessment on persons so chargeable.

Tax is charged at the standard rate except for: Salaries Tax, which is subject to personal allowance deduction and a sliding scale of tax: proprietors of small unincorporated businesses who have an exemption limit of $7,000 with provision for marginal relief where the profits of those businesses are only slightly in excess of $7,000; property owners-if the rent receivable is controlled by reference to the 1941 rental, the Property Tax charge is reduced to one-half the standard rate. Also, as an alternative to the separate taxes, a resident may elect to have Personal Assessment. A single assessment aggregating his total Hong Kong income, excluding dividends, granting personal allowances, and charging the same sliding scale of tax as for Salaries Tax is then made, with a set-off being allowed of any of the four separate taxes already paid.

The personal allowances at present are: for the taxpayer $7,000; for his wife $7,000; for each of the first two children $2,000; for each of the third to sixth child $1,000 and for each of the seventh to ninth child $500. This makes a maximum allowance for children