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Q9. What are the main sources of government revenue?
- Based on our estimates for 2000-01, our main sources of revenue are land premium,
profits tax, and salaries tax They account for 17%, 15% and 10% respectively of our total
revenue.
Q10. Does everyone need to pay tax? Is the tax base very narrow?
- No. Under our existing salaries tax structure (tax bands, tax rates, deductions and
allowances taken together), only 37% of our total working population (i.e. only around 1.2
million of 3.2 million) are required to pay any salaries tax. The top 100,000 taxpayers
contribute 61% of the total revenue from salaries tax, and whereas the bottom half of the
taxpayers contribute only 4.4% of the total salaries tax yield. Only 0.3% of the working
population (about 10,000) pay at the standard rate of 15% and they contribute 18.5% of the
total salaries tax receipts.
As regards profits tax, under our existing tax system (both the tax
rates and the various allowances and deductions taken together), only 10% of all business
entities are required to pay any profits tax. Less than 5% of the corporations contribute
over 80% of profits tax from incorporated businesses, whereas 80% of corporations
contributed only 7% of the total corporate profits tax yield.
Q11. Will new taxes be introduced?
- As recommended by the Financial Secretary in the 2000 Budget, an Advisory Committee on
New Broad-based Taxes has been set up to look into the suitability of introducing new
types of broad-based taxes, and to consider what form such taxes should take and their
implications. Our objective is to ensure that the Government would have a stable stream of
revenue while keeping a low, simple and predictable tax regime.
Q12.Why do the government insist on the user pay principle when
determining fees and charges? Currently are the costs of all public services recovered
according to this principle?
- It is our well established policy to adopt "user pays" principle for setting government fees and charges. The rationale for this is to ensure that those who benefit from the services provided should pay for them, so that the costs of providing the services are recovered to the required extent and do not fall on general taxpayers. The income from fees and charges represents a major revenue source, accounting for about 10% of the total recurrent government revenue. It also underpins our low tax policy and is an important tool in our striving to achieve a fiscal balance as stipulated in the Basic Law. There are certain exceptions to this principle whereby we would provide subsidies to services which are vital to the public and affect their livelihood, such as school fees and medical fees. Consequently, we are seeking only partial recovery for these services.
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