By this time of year I have normally filed my salaries tax return and have calculated the amount I will have to pay next January. At first blush it may not seem to be a significant percentage of my earnings however the reality is that the salaries tax we all pay is only part of the revenue we contribute to the Government’s coffers.
For example, I purchased my flat from a developer that had acquired the interest in the land from the Government. Upon signing the lease of the land from the date of possession to June 2047, the developer would have had to pay land a premium to the Government. The land premium, the rate of which varies depending on the location of the site, will have been recovered by the developer on the sale of the units.
As my flat cost more than HK$6m I also had to pay stamp duty at the rate of 3.75% of the consideration paid for the property at the time of acquisition. Then, of course, I have to pay rates, which are an indirect tax levied on properties. The charge is currently 5 percent of the rateable value (estimated annual rental value of the property). However for 2009/2010 the Government has waived the collection of rates as a budget concession, subject to a ceiling of $1,500 per quarter per household.
Perhaps foolishly I drive to my office. When I acquired my car I again contributed to the Government’s revenue, this time by the payment of a First Registration tax. The tax is charged at progressive rates commencing at 35% of the cost of the vehicle increasing to 85% once the price of the vehicle exceeds $300,000 and to 100% for a vehicle costing in excess of $500,000. In addition, I have to pay the Government $9,124 every year i.e. $25 per day, for my vehicle licence and $6.06 per litre in excise duty on unleaded petrol.
Once at the office, its rent and all my purchases reflect the cost of the land premium paid. In addition I have to pay an annual business registration fee and levy of $2,450.
Luckily I don’t smoke, but if I did I would be contributing a further $1.206 per cigarette in contrast to the excise duty that has been removed on wine. My other folly, an enjoyable night at the races, is yet another means of contributing to the Government’s revenue.
There are many more indirect taxes, levies and duties but at least we are fortunate that Hong Kong’s tax system is not as aggressive in terms of revenue collection as other jurisdictions. Nonetheless, it is all to easy for the Government to quote how few people pay direct taxes whilst ignoring the indirect taxes we all pay.
