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PRESS RELEASE

(Source : Government Information Centre)

Inland Revenue Amendment Bill to be introduced into LegCo

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The Government will introduce into the Legislative Council an Inland Revenue Amendment Bill which seeks to give effect to the proposal to increase the maximum level of home loan interest deduction to $150,000. The Bill also proposes to allow taxpayers to apply for holdover of the whole or part of the payment of 2001/02 Provisional Salaries Tax in the light of the increase in the tax-deduction ceiling.

In the 2001 Policy Address, the Chief Executive announced that the Government would propose to the Legislative Council an increase in the maximum amount of home loan interest deduction by 50%, from the existing level of $100,000 to $150,000, for the two years of assessment 2001/02 and 2002/03. The proposal is intended to ease the financial burden of home owners.

The home loan interest deduction under salaries tax was introduced in the 1998/99 Budget. A maximum yearly deduction of $100,000 was granted for each year of assessment in respect of interest paid on a home loan on or after April 1, 1998. The deduction is available for any five tax years.

"In order that taxpayers may benefit from the enhancement in the tax-deduction ceiling early, we propose to provide a transitional arrangement allowing taxpayers who pay more than $100,000 of home loan interest in the current tax year to apply for holding over of the whole or part of the Provisional Salaries Tax payable in the first quarter of 2002," the Government spokesman said.

"If such transitional arrangement is not provided, taxpayers will not see any benefit from the enhancement in home loan interest deduction until January 2003 at the earliest," the spokesman added.

"The maximum amount of holdover allowed under this transitional arrangement will be no greater than that part of the Provisional Salaries Tax which is shown to be affected by the increased level of tax-deduction," the spokesman said.

It is estimated that for each of the 2001/02 and 2002/03 tax years, over 110,000 taxpayers would benefit from the proposed enhancement in home loan interest deduction. The maximum tax saving for a taxpayer will be $8,500 per year. The cost to revenue is estimated to be in the order of $1 billion.

The Inland Revenue (Amendment) Bill 2001 will be gazetted on Friday, October 26. The Secretary for the Treasury will introduce the Bill into the Legislative Council on Wednesday, October 31.

If the amendment Ordinance is enacted, the Inland Revenue Department will widely publicize the procedure and timeframe for application for holdover by eligible taxpayers.

End/Wednesday, October 24, 2001

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