SUPPLEMENT

NOTES ON THE TEXT

Salaries Tax Concessions
Rates Concessions
Adjustments to Duty Rates
Economic Performance in 1996
Economic Prospects for 1997
Full Text of the Articles of the Basic Law Referred to in the Budget Speech

SALARIES TAX CONCESSIONS

Summary of concessions

A. Increase in allowances and deductions

Present Proposed Increase
($) ($) ($) (%)
Basic Allowances:  
Basic 90,000 100,000 10,000 11.1
Married 180,000 200,000 20,000 11.1
Additional Allowances:  
Child :
1st to 2nd child 24,500 27,000 2,500 10.2
3rd to 9th child 12,500 14,000 1,500 12.0
Dependent Parent/Grandparent  
Basic 24,500 27,000 2,500 10.2
Additional allowance (for dependant living with taxpayer) 7,000 8,000 1,000 14.3
Dependent Brother/Sister 24,500 27,000 2,500 10.2
Single Parent 45,000 75,000 30,000 66.7
Disabled Dependant 15,000 25,000 10,000 66.7
Additional Deduction:  
Training 12,000 20,000 8,000 66.7



B. Revision of marginal tax bands and rates

Present Proposed
Marginal Tax Band Marginal Tax Rate
(%)		 Marginal Tax Band Marginal Tax Rate
(%)
First $20,000 chargeable income 2 First $30,000 chargeable income 2
Next $30,000 9 Next $30,000 8
Next $30,000 17 Next $30,000 14
Remainder 20 Remainder 20



Effect of the revision of the marginal tax bands and rates on tax payable
for the first $100,000 chargeable income

Present Proposed Tax Reduction
Chargeable income Rate Tax
($)		 Cumulative tax
(A)
($)		 Rate Tax
($)		 Cumulative tax
(B)
($)		 (A)-(B)
($) (%)
First $10,000 2% 200 200 2% 200 200 - -
Next $10,000 2% 200 400 2% 200 400 - -
Next $10,000 9% 900 1,300 2% 200 600 700 53.8
Next $10,000 9% 900 2,200 8% 800 1,400 800 36.4
Next $10,000 9% 900 3,100 8% 800 2,200 900 29.0
Next $10,000 17% 1,700 4,800 8% 800 3,000 1,800 37.5
Next $10,000 17% 1,700 6,500 14% 1,400 4,400 2,100 32.3
Next $10,000 17% 1,700 8,200 14% 1,400 5,800 2,400 29.3
Next $10,000 20% 2,000 10,200 14% 1,400 7,200 3,000 29.4
Next $10,000 20% 2,000 12,200 20% 2,000 9,200 3,000 24.6
$100,000		  

Salaries tax rates and allowances
What you save!

Single person

Present tax: $15,000
Proposed tax: $10,000
Saving: $5,000 (33%)



Single person with a dependent parent living with the taxpayer

Present tax: $8,700
Proposed tax: $4,260
Saving: $4,440 (51%)



Single person with 2 dependent parents living with the taxpayer and a dependent brother/sister still receiving full-time education

Present tax: $985
Proposed tax: $140
Saving: $845 (86%)



Single person with 2 dependent parents living with the taxpayer and having incurred an expense of $20,000 in 1997-98 in attending a training course at an approved institution

Present tax: $2,110
Proposed tax: $280
Saving: $1,830 (87%)



Married couple with no children

Present tax: $760
Proposed tax: $80
Saving: $680 (89%)



Married couple with 2 children

Present tax: $0
Proposed tax: $0
Saving: $0



Single parent with 2 children

Present tax: $400
Proposed tax: $0
Saving: $400 (100%)



Salaries tax rates and allowances
What you save!

Single person

Present tax: $36,600
Proposed tax: $31,600
Saving: $5,000 (14%)



Single person with a dependent parent living with the taxpayer

Present tax: $30,300
Proposed tax: $24,600
Saving: $5,700 (19%)



Married couple with no children

Present tax: $18,600
Proposed tax: $11,600
Saving: $7,000 (38%)



Married couple with 2 children

Present tax: $8,800
Proposed tax: $2,840
Saving: $5,960 (68%)



Married couple with 2 children and 1 disabled dependent parent living with the taxpayer

Present tax: $1,885
Proposed tax: $0
Saving: $1,885 (100%)



Married couple with 1 child, 1 disabled dependent brother/sister and 1 dependent parent living with the taxpayer

Present tax: $1,885
Proposed tax: $0
Saving: $1,885 (100%)



Married couple with 1 child, 1 dependent parent living with the taxpayer who has also incurred an expense of $20,000 in 1997-98 in attending a training course at an approved institution

Present tax: $5,480
Proposed tax: $600
Saving: $4,880 (89%)



Single parent with 2 children

Present tax: $17,800
Proposed tax: $6,220
Saving: $11,580 (65%)



Annual income levels below which no salaries tax is payable

Present
($) 		Proposed
($)		 %
No dependent parent/grandparent
Single 90,001 100,001 +11.1
Married 180,001 200,001 +11.1
Married + 1 child 204,501 227,001 +11.0
Married + 2 children 229,001 254,001 +10.9
Married + 3 children 241,501 268,001 +11.0
Including two dependent parents/grandparents
Single 139,001 154,001 +10.8
Married 229,001 254,001 +10.9
Married + 1 child 253,501 281,001 +10.8
Married + 2 children 278,001 308,001 +10.8
Married + 3 children 290,501 322,001 +10.8
Including two dependent parents/grandparents both living with the taxpayer
Single 153,001 170,001 +11.1
Married 243,001 270,001 +11.1
Married + 1 child 267,501 297,001 +11.0
Married + 2 children 292,001 324,001 +11.0
Married + 3 children 304,501 338,001 +11.0
Including one dependent parent/grandparent and having incurred an expense of $20,000 in 1997-98 in attending a training course at an approved institution
Single 126,501 147,001 +16.2
Married 216,501 247,001 +14.1
Married + 1 child 241,001 274,001 +13.7
Married + 2 children 265,501 301,001 +13.4
Married + 3 children 278,001 315,001 +13.3
Including one dependent parent/grandparent living with the taxpayer and one disabled dependent brother/sister
Single 161,001 187,001 +16.1
Married 251,001 287,001 +14.3
Married + 1 child 275,501 314,001 +14.0
Married + 2 children 300,001 341,001 +13.7
Married + 3 children 312,501 355,001 +13.6
Single parent with
1 child 159,501 202,001 +26.6
2 children 184,001 229,001 +24.5
3 children 196,501 243,001 +23.7

Annual income levels at which salaries taxpayers enter the standard rate zone

Present
($) 		Proposed
($)		 %
No dependent parent/grandparent
Single 516,000 616,000 +19.4
Married 876,000 1,016,000 +16.1
Married + 1 child 974,000 1,124,000 +15.4
Married + 2 children 1,072,000 1,232,000 +14.9
Married + 3 children 1,122,000 1,288,000 +14.8
Including two dependent parents/grandparents
Single 712,000 832,000 +16.9
Married 1,072,000 1,232,000 +14.9
Married + 1 child 1,170,000 1,340,000 +14.5
Married + 2 children 1,268,000 1,448,000 +14.2
Married + 3 children 1,318,000 1,504,000 +14.1
Including two dependent parents/grandparents both living with the taxpayer
Single 768,000 896,000 +16.7
Married 1,128,000 1,296,000 +14.9
Married + 1 child 1,226,000 1,404,000 +14.5
Married + 2 children 1,324,000 1,512,000 +14.2
Married + 3 children 1,374,000 1,568,000 +14.1
Including one dependent parent/grandparent living with the taxpayer and one disabled dependent brother/sister
Single 800,000 964,000 +20.5
Married 1,160,000 1,364,000 +17.6
Married + 1 child 1,258,000 1,472,000 +17.0
Married + 2 children 1,356,000 1,580,000 +16.5
Married + 3 children 1,406,000 1,636,000 +16.4
Single parent with
1 child 794,000 1,024,000 +29.0
2 children 892,000 1,132,000 +26.9
3 children 942,000 1,188,000 +26.1

Effect of the increase in allowances and the revision of the marginal tax bands and rates

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RATES PERCENTAGE CHARGES

Present
percentage charge 		Proposed
percentage charge
Urban Council Area
General Rates for Hong Kong
and Kowloon
(including New Kowloon) 		2.70% 2.40%
Urban Council Rates 2.80% 2.60%
Overall 5.50% 5.00%
Regional Council Area
General Rates for the
New Territories 		1.10% 0.80%
Regional Council Rates 4.40% 4.20%
Overall 5.50% 5.00%

EFFECT OF THE GENERAL REVALUATION AND
THE BUDGET RATES CONCESSION PACKAGE ON
MAIN PROPERTY CLASSES

Property Type Average
Increase/
Decrease(-)
in Rateable
Value 		1997-98
Average Increase
/Decrease(-)
in Rates Payment 		Average
Rates
Payment
  % $ per
month		 % $ per
month
Small Domestic Premises(1)
(Private) 		21 29 8.8 360
Medium Domestic
Premises(1)(Private) 		27 100 13.3 851
Large Domestic Premises(1)
(Private) 		36 276 16.4 1,964
Public Domestic Premises(2) 13 5 2.6 196
All Domestic Premises(3) 23 31 9.3 363
Shops and Commercial
Premises		 11 -12 -0.6 1,854
Offices 4 -130 -6.0 2,044
Industrial Premises(4) -9 -229 -17.0 1,121
All Non-domestic
Premises(5) 		10 -65 -3.4 1,873
All Properties 17 17 3.0 587


(1) Domestic units are classified by relation to saleable areas as below?
Small domestic up to 69.9 m2 (up to 752 sq.ft.)
Medium domestic 70 m2 to 99.9 m2 (753 sq.ft. - 1,075 sq.ft.)
Large domestic 100 m2 and over (1,076 sq.ft. and above)
(2) Including Housing Authority and Housing Society rental units
(3) Including car parking spaces
(4) Including factories and storage premises
(5) Including miscellaneous premises such as hotels, cinemas, petrol filling stations, schools, car parking spaces

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STAMP DUTY ON PROPERTY TRANSACTIONS

(i) Comparison of present and proposed rates of stamp duty (subject to marginal relief)

Property consideration Present Proposed
Up to $750,000 $100 $100
$750,001 - $1,000,000 0.75% $100
$1,000,001 - $1,500,000 0.75% 0.75%
$1,500,001 - $2,000,000 1.50% 0.75%
$2,000,001 - $2,500,000 1.50% 1.50%
$2,500,001 - $3,000,000 2.00% 1.50%
$3,000,001 - $3,500,000 2.00% 2.00%
$3,500,001 - $4,000,000 2.75% 2.00%
Over $4,000,000 2.75% 2.75%



(ii) Broad effect of the concession on property transactions

Property consideration Estimated number of transactions which will benefit under the Budget proposal in 1997-98 Average stamp duty saved per transaction
Up to $1,000,000 12,000 $6,200
$1,000,001 - $2,000,000 24,100 $12,000
$2,000,001 - $3,000,000 9,400 $13,200
$3,000,001 - $4,000,000 5,100 $26,000
  50,600  



(iii) Examples to show the effect of adjustments to the schedule of stamp duty rates

Property consideration Duty payable Duty saved
Present Proposed Amount Percentage
$1,000,000 $7,500 $100 $7,400 99%
$2,000,000 $30,000 $15,000 $15,000 50%
$3,000,000 $60,000 $45,000 $15,000 25%
$4,000,000 $110,000 $80,000 $30,000 27%

ESTATE DUTY

Comparison of present and proposed rates of estate duty (subject to marginal relief)

Estate value Present Proposed
Up to $6,500,000 No duty No duty
$6,500,001 to $7,000,000 6% No duty
$7,000,001 to 8,000,000 6% 6%
$8,000,001 to 8,500,000 12% 6%
$8,500,001 to 9,500,000 12% 12%
$9,500,001 to 10,000,000 18% 12%
Over $10,000,000 18% 18%

ADJUSTMENTS TO DUTY RATES
OF HYDROCARBON OIL, TOBACCO,
METHYL ALCOHOL AND ALCOHOLIC BEVERAGES

Hydrocarbon oil

Present rate
($ per litre)		 Proposed rate
($ per litre)
Aircraft spirit 5.79 6.14
Light diesel oil 2.89 3.06
Motor spirit (leaded petrol) 6.43 6.82
Motor spirit (unleaded petrol) 5.72 6.06



Tobacco

Present rate
($ per 1,000 sticks)		 Proposed rate
($ per 1,000 sticks)
Cigarettes 682 723
  ($ per Kg) ($ per Kg)
Cigars 877 930
Chinese prepared tobacco 167 177
All other manufactured tobacco except tobacco intended for the manufacture of cigarettes 825 875



Methyl Alcohol

Present rate
($ per 100 litres)		 Proposed rate
($ per 100 litres)
Methyl alcohol and any admixture containing methyl alcohol 747.0 792.0
In addition, for every 1% by which the alcoholic strength by volume exceeds 30% 25.0 26.5



Alcoholic Beverages

Present rate Proposed rate
Wine 90% 60%

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ECONOMIC PERFORMANCE IN 1996

1. Estimated growth rates of the GDP and its expenditure components and rates
of increase in the main price indicators in 1996:

(i) Growth rates in real terms of:

(%) (%)
Private consumption expenditure   4.4
Government consumption expenditure   4.6
Gross domestic fixed capital formation   11.1
transfer costs of land and buildings 52.6 
building and construction 5.6 
real estate developers' margin 3.2 
machinery and equipment 13.5 
Totol exports of goods  4.8
domestic exports -8.4 
re-exports 7.5 
Imports of goods   4.3
Exports of services  6.2
Imports of services  2.0
Gross domestic product (GDP)  4.7
Per capita GDP   2.2
Per capita GDP at current prices HK$189,400
(US$24,500)
(ii) Rates of increase in:
Consumer Price Index (A) 6.0
      GDP deflator 5.3


2. Performance of domestic exports and re-exports

(i) Annual growth rates in real terms of:

Domestic exports
(%)		 Re-exports
(%)
1994 -2 14
1995 2 14
1996 -8 8
(ii) Shares of domestic exports and re-exports in the value of total exports:
Domestic exports
(%)		 Re-exports
(%)
1991 30 70
1992 25 75
1993 21 79
1994 19 81
1995 17 83
1996 15 85


3. Annual growth rates in real terms of retained imports:

Retained imports
Total
(%)		 Foodstuffs and consumer goods
(%)		 Raw materials and semi-manufactures
(%)		 Capital goods
(%)
1994 14 15 11 11
1995 13 3 15 23
1996 -2 -8 * 1
* Less than 0.5%

4. Hong Kong's visible and invisible trade balance in 1996:

$Billion
Domestic exports 212 
Re-exports 1,186 
Total exports 1,398  
Imports* 1,540  
Visible trade balance   -142
Invisible trade balance#   130
Balance on visible and invisible trade combined#   -12
* Including an estimate of imports of gold for industrial use.
# Preliminary estimate.


5. Unemployment and underemployment rates:

Unemployment rate
(%)		 Underemployment rate
(%)
1994 1.9 1.4
1995 3.2 2.1
1996 2.8 1.7


6. Annual rates of increase in the Consumer Price Indices:

CPI(A)
(%)		 CPI(B)
(%)		 Hang Seng CPI
(%)		 Composite CPI
(%)
1993 8.5 8.7 9.5 8.8
1994 8.1 8.6 10.0 8.8
1995 8.7 9.2 9.6 9.1
1996 6.0
(6.0)		 6.6
(6.4)		 7.0
(6.6)		 6.5
(6.3)
Figures in brackets are 1994/95-based. Figures not in brackets are 1989/90-based.

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ECONOMIC PROSPECTS FOR 1997

Forecast growth rates of the GDP and its expenditure components and rates
of increase in the main price indicators in 1997:

(i) Growth rates in real terms of:

(%) (%)
Private consumption expenditure   5.5
Government consumption expenditure   5
Gross domestic fixed capital formation   7.4
transfer costs of land and buildings 13.5 
building and construction 5.8 
real estate developers' margin 8.5 
machinery and equipment 7.6 
Totol exports of goods  8.5
domestic exports 0 
re-exports 10 
Imports of goods  8.9
Exports of services  8
Imports of services  6
Gross domestic product (GDP)  5.5
Per capita GDP   2.5
Per capita GDP at current prices HK$207,800
(US$26,600)
(ii) Rates of increase in:
Consumer Price Index (A) 7.0
     GDP deflator 7

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FULL TEXT OF THE ARTICLES OF THE BASIC LAW
REFERRED TO IN THE BUDGET SPEECH

Article 5

The socialist system and policies shall not be practised in the Hong Kong Special Administrative Region, and the previous capitalist system and way of life shall remain unchanged for 50 years.

Article 106

The Hong Kong Special Administrative Region shall have independent finances.

The Hong Kong Special Administrative Region shall use its financial revenues exclusively for its own purposes, and they shall not be handed over to the Central People Government.

The Central People Government shall not levy taxes in the Hong Kong Special Administrative Region.

Article 107

The Hong Kong Special Administrative Region shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product.

Article 108

The Hong Kong Special Administrative Region shall practise an independent taxation system.

The Hong Kong Special Administrative Region shall, taking the low tax policy previously pursued in Hong Kong as reference, enact laws on its own concerning types of taxes, tax rates, tax reductions, allowances and exemptions, and other matters of taxation.

Article 109

The Government of the Hong Kong Special Administrative Region shall provide an appropriate economic and legal environment for the maintenance of the status of Hong Kong as an international financial centre.

Article 110

The monetary and financial systems of the Hong Kong Special Administrative Region shall be prescribed by law.

The Government of the Hong Kong Special Administrative Region shall, on its own, formulate monetary and financial policies, safeguard the free operation of financial business and financial markets, and regulate and supervise them in accordance with law.

Article 112

No foreign exchange control policies shall be applied in the Hong Kong Special Administrative Region. The Hong Kong dollar shall be freely convertible. Markets for foreign exchange, gold, securities, futures and the like shall continue.

The Government of the Hong Kong Special Administrative Region shall safeguard the free flow of capital within, into and out of the Region.

Article 114

The Hong Kong Special Administrative Region shall maintain the status of a free port and shall not impose any tariff unless otherwise prescribed by law.

Article 115

The Hong Kong Special Administrative Region shall pursue the policy of free trade and safeguard the free movement of goods, intangible assets and capital.

Article 116

The Hong Kong Special Administrative Region shall be a separate customs territory.

The Hong Kong Special Administrative Region may, using the name 鐈ong Kong, China? participate in relevant international organizations and international trade agreements (including preferential trade arrangements), such as the General Agreement on Tariffs and Trade and arrangements regarding international trade in textiles.

Export quotas, tariff preferences and other similar arrangements, which are obtained or made by the Hong Kong Special Administrative Region or which were obtained or made and remain valid, shall be enjoyed exclusively by the Region.

Article 121

As regards all leases of land granted or renewed where the original leases contain no right of renewal, during the period from 27 May 1985 to 30 June 1997, which extend beyond 30 June 1997 and expire not later than 30 June 2047, the lessee is not required to pay an additional premium as from 1 July 1997, but an annual rent equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter, shall be charged.

Article 151

The Hong Kong Special Administrative Region may on its own, using the name 鐈ong Kong, China? maintain and develop relations and conclude and implement agreements with foreign states and regions and relevant international organizations in the appropriate fields, including the economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports fields.

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APPENDICES A to E