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LCQ12: Tax concessions for small and medium enterprises
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Following is a question by the Hon Jeffrey Lam Kin-fung and a written
reply by the Secretary for Financial Services and the Treasury,
Professor K C Chan, in the Legislative Council today (December 17):
Question:
In the light of the recent global
financial tsunami, certain chambers of commerce and professional
bodies have suggested that the Government should provide tax concessions
to small and medium enterprises (SMEs) so that they could have more
operating capital. In this connection, will the Government inform
this Council whether it will:
(a) consider allowing SMEs to hold
over the payment of profits tax for the 2009-2010 tax year for one
year;
(b) extend to next year the due date
for SMEs to pay provisional tax for the current year of assessment,
and exempt SMEs from the fine payable for overdue tax payment; and
(c) in view of the current business
environment for SMEs, reconsider the arrangements of "group
loss relief" and "loss carry-back" for corporate
losses under the profits tax regime (such arrangements allow losses
of one or more companies to offset profits of other companies of
the same group and allow losses to offset profits made in previous
years so that the company concerned can get a refund on tax paid)?
Reply:
President,
(a) We have not assessed the provisional
tax for the year of assessment 2009-10, and the relevant tax payment
will not be due until November 2009 to April 2010. The Inland Revenue
Ordinance already has flexible arrangement to cater for reduction
in taxpayers' income. If a taxpayer estimates that his/her assessable
income or profits for a year would be less than 90% of that of the
previous year, he/she may apply for a corresponding holdover of
the provisional tax of that year.
Allowing taxpayers to hold over tax
payment for a year irrespective of their actual income would have
a serious impact on Government's tax revenue, and would significantly
increase taxpayers' tax burden in the next year of assessment. We
will not consider this proposal at this stage.
(b) Generally speaking, the Commissioner
of Inland Revenue has no power to amend the due dates specified
on the demand notes unless the Inland Revenue Department has to
revise the assessment. As the demand notes for the current year
has already been issued, it is not feasible to extend the due dates
for paying the provisional tax for the current year.
To ensure that taxpayers pay tax
on time, the Inland Revenue Department will impose a surcharge on
overdue tax payments. It would be unfair to other taxpayers if we
exempt some taxpayers from the surcharge.
(c) Introducing the arrangements of
"group loss relief" and "loss carry-back" may
result in significant loss of tax revenue. The revenue implication
would be particularly acute during economic downturns. Besides,
the two arrangements could be abused easily for tax avoidance. Complicated
legislative provisions would be necessary to define clearly the
scope of the arrangements so as to guard against abuse. However,
this would complicate our simple tax system, and substantial resources
would also be required to scrutinise and investigate claims. Therefore,
we consider that it is not desirable to introduce these two arrangements.
Ends/Wednesday, December 17, 2008
Issued at HKT 11:31
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