ENG-2003 — Page 103

THE ECONOMY

Under the Dutiable Commodities Ordinance, duties are levied on only four types of commodities hydrocarbon oil, alcoholic beverages, other alcohol products (i.e. methyl and ethyl alcohol) and tobacco products, both locally manufactured and imported. The Customs and Excise Department is responsible for collecting these duties. In 2002-03, the department collected duties worth $6.6 billion or about 4 per cent of total revenue.

The Rating and Valuation Department is responsible for the billing and collection of rates, which are levied on landed properties at a specified percentage of their rateable value. For the 2003-04 financial year, the rates charge is 5 per cent.

The rateable value of a property is an estimate of its annual rent in the open market as at a designated date. In order to better reflect prevailing market rents, revaluation of rateable values is now conducted on an annual basis. The current Valuation List took effect on April 1, 2003 with rateable values reflecting rental values at October 1, 2002. The Valuation List as at March 31, 2003 contained about 2 089 000 assessments. In 2002-03, the revenue from rates was $8.9 billion, accounting for about 5 per cent of total revenue.

A one-off concession was granted to all ratepayers as a relief measure to help the community tide over the difficulties due to the outbreak of SARS. The concession was equivalent to the actual rates payable for the July to September 2003 quarter, subject to a ceiling of $5,000 for each non-domestic property or $1,250 in the case of domestic property. About 90 per cent of ratepayers were not required to pay any rates in the July to September 2003 quarter, while the remaining 10 per cent of ratepayers had their rates bills reduced by the full concession amount of $5,000 or $1,250, as the case might be. The concession produced a total saving of $2 billion for ratepayers.

The Rating and Valuation Department is also responsible for the billing and collection of government rent which is payable from July 1, 1997 for land leases granted on or after May 27, 1985, and on the extension of non-renewable land leases. The latter group comprises all land leases in the New Territories and New Kowloon north of Boundary Street which were renewed on June 28, 1997. Government rent is levied at 3 per cent of the rateable value of the lot and is adjusted in step with any subsequent changes in the rateable value. There were about 1 535 000 assessments in the Government Rent Roll as at March 31, 2003. The total government rent collected in 2002-03 was $4.3 billion.

The Government derives significant amounts of revenue from other sources. Fees and charges for services provided by government departments generated about $9.7 billion, or about 6 per cent of total revenue, in 2002-03. It is government policy that fees should in general be set at levels sufficient to recover the full cost of providing the services. Certain essential services are, however, subsidised by the Government or provided free of charge. Government-operated public utilities generated about $2.1 billion which accounted for about 1 per cent of the total revenue; the most important of these, in revenue terms, is water charges. The Government has frozen most government fees and charges since February 1998 to ease the burden on the community at a time of economic setback. Owing to the outbreak of SARS, the Government announced a package of relief measures in April to help the community tide over the difficulties and revive the economy. As part of the package of relief measures, the Government provided some one-off concessions by reducing water and sewage charges and trade effluent surcharge for a four-month billing period and waiving certain licensing fees for a maximum of one year. In addition, the

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