Economic crisis to hit tax revenues
Updated: 2009-05-05 07:31
By Teddy Ng(HK Edition)
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HONG KONG: Tax income for the current fiscal year is expected to fall by 22 percent as a result of the economic downturn, the Inland Revenue Department predicted yesterday.
Reaping the benefits of the prosperous economic development early last year, the city took in HK$104.1 billion in taxes during the 2008-09 fiscal year. That was 14 percent higher than 2007-08. Salaries tax totals reached HK$39 billion in the last fiscal year, representing an increase of 4 percent.
But the financial crisis emerging last September significantly changed the picture. Stamp duty on property and shares transactions dropped by 38 percent from 2007, to HK$32 billion in the fiscal year. Business registration fees recorded a 90 percent drop to HK$155 million in the same period. Estate duty and betting duty also recorded declining returns.
The department processed 59,000 provisional salaries tax and 8,400 provisional profits tax holdover applications during the last fiscal year, representing an increase of 84 percent and 100 percent respectively over the previous year.
The percentage of tax arrears increased to 5 percent from 3.6 percent.
Total tax income for the last fiscal year reached HK$191.4 billion, representing a drop of 5 percent from 2007-08.
Commissioner of Inland Revenue Alice Lau said the increase in profits tax and salaries tax do not reflect the impact of the financial crisis. She presented a gloomier picture for next year.
"The increase in provisional tax holdover applications last year reflected the worsening economy. The financial tsunami will inevitably affect tax income for the current fiscal year," she said.
Profits tax for the current fiscal year is expected to drop by 32 percent to HK$71 billion. Salaries tax is expected to go down by 10 percent to HK$35.1 billion.
"The increase in profits tax for the last fiscal year is partly caused by the surge of 45 percent in income generated by the banking sector, and 38 percent in the property, investment and financial sector," Lau said. "These sectors are hard hit in the financial crisis."
Estate, stamp and betting duties also are expected to drop by between 2 percent and 55 percent, while increases in business registration fees, property tax and personal assessment are expected.
The total tax income for the current fiscal year is expected to go down by 22 percent to HK$149.5 billion.
Lau also expressed concern over the narrow tax base in Hong Kong, adding that only 300,000 companies out of 880,000 registered opt to pay profits tax. Most others choose to pay personal assessment.
Some 72.6 percent of profits taxes received last fiscal year were paid by only 1,200 companies which had more than HK$50 million assessable profits.
The department is sending out 2.08 million individual tax returns. Lau said if a taxpayer is certain that he will be earning significantly less in the current fiscal year because of unemployment or change of jobs, he can furnish details by making a note on the tax return, or on a separate paper.
The department will consider the information and demand a lesser amount on the 2009-10 provisional tax, she added.
(HK Edition 05/05/2009 page1)