ENG-1982 — Page 72

FINANCIAL SYSTEM AND ECONOMY

43

year 1982-3, the estimated yield from internal revenue is $14,626 million compared with actual collections of $14,216 million for 1981-2. The estimate for 1982-3 takes account of the cost to internal revenue, amounting to $1,371 million, of various tax concessions announced by the Financial Secretary in his 1982 Budget Speech.

Betting duty is imposed on bets on authorised totalisators or pari-mutuels, and on proceeds of the Mark Six Lottery. The rate of duty is either 7 per cent or 11 per cent, depending on the type of bet placed, and 25 per cent on the proceeds of lotteries. The anticipated yield for the financial year 1982-3 is $1,220 million compared with actual collections of $998 million for 1981-2.

Business registration is compulsory for every company incorporated in Hong Kong, every overseas company with a place of business in Hong Kong, and every business operating in Hong Kong, except those carried out by charitable institutions. The annual registration fee is $175, but exemption from payment is granted when an unincorporated business is very small. The total yield from these fees, service fees for copies of documents and other fees for 1982-3 is estimated at $67 million.

Entertainments tax is imposed on the price of admission to cinemas and race meetings at rates which vary with the prices charged for admission. This averages about nine per cent in the case of cinemas and 29 per cent in the case of race meetings. The estimated yield for 1982-3 is $65 million.

Estate duty is imposed on that part of a deceased's estate which is situated in Hong Kong. From June 4, 1982, estates valued at under $2 million (previously $1 million) are exempt and the rates of duty now charged range from a minimum of 10 per cent (previously 15 per cent) on estates valued between $2 million and $2.5 million (previously $1 million and $1.5 million) to a maximum of 18 per cent on estates valued in excess of $4 million. The estimated yield for 1982–3, after deducting $42 million due to the increased exemption limit, the reduced rates of duty, and the exemption from duty of the principal matrimonial home of the deceased, is $238 million compared with the actual collections of $316 million in 1981-2.

Hotel accommodation tax is imposed on hotel and guest house accommodation at the rate of four per cent on the accommodation charges paid by guests. For the 1982-3 financial year the anticipated yield is $65 million.

Earnings and profits tax is levied under the Inland Revenue Ordinance. Hong Kong has a schedular system of taxation whereby persons liable are assessed and required to account for tax on four separate and distinct sources of income, namely business profits, salaries, property and interest. Superimposed upon the schedular system is a form of aggregation called personal assessment whereby a person can voluntarily elect to be assessed on his total Hong Kong income from these sources.

The current standard rate of tax of 15 per cent has been in force since April 1, 1966. Profits tax is charged only on profits arising in, or derived from, Hong Kong from a trade, profession or business carried on in Hong Kong. Profits of unincorporated businesses are taxed at 15 per cent while profits of corporations are taxed at 161 per cent. Assessable profits are determined on the actual profits for the year of assessment. There is a system of provisional payment of tax based on the profits of the preceding year of assessment. As in many other countries, profits assessable to profits tax in Hong Kong are the net profits. Generally, all expenses incurred in the production of assessable profits are deductible, as are charitable donations to the extent of 10 per cent of net assessable profits. There is no withholding tax on dividends paid by corporations, and dividends received from corporations are exempt.