F.

3
Economics&
Mathematics
Project
Cheung Chi Yi 3A(2)
Liu Pui Shan 3A (13)
Chiu Chak Ho 3A(23)
 Page 2

Content
 Page 3

Task 1

Major types of tax collection in Hong Kong

Type of tax 2015-16 2016-17 2017-18
($m) ($m) ($m)
Profits Tax 140,226.6 139,238.1 139,100.2

Corporations 135,574.0 134,031.3 133,459.3

Unincorporated
Businesses 4,652.6 5,206.8 5,640.9

Salaries Tax 57,867.8 59,077.5 60,838.8

Property Tax 2,998.0 3,371.7 3,447.8

Personal 4,790.0 5,220.0 5,342.5

Assessment
Total Earnings
and Profits Tax 205,882.4 206,907.3 208,729.3
Estate Duty 30.0 18.8 31.3

Stamp Duty 62,680.3 61,899.0 95,172.8

Betting Duty 20,127.2 21,119.0 21,959.1

Business 2,607.1 227.7 2,726.7

Registration Fees
85,444.6 83,264.5 119,889.9
Total revenue
collected 291,327.0 290,171.8 328,619.2

% change over -3.5% -0.4% +13.2%

previous year
 Page 4

Types of tax
Major types:
1. Profits Tax
 Corporations
 Unincorporated Businesses
2. Salaries Tax
3. Stamp Duty
4. Betting Duty

Non-major types:
1. Property Tax
2. Personal Assessment
3. Estates duty
4. Business Registration Fees

(Non-major tax types are included in others)

major types of tax collection in Hong Kong in 2017-

2018
Others
Betting Duty
3%
7%

Profits Tax
Stamp Tax 43%
29%

salaries Tax
18%
 Page 5

Tax collected from each major type of tax

in the past three financial years
160000
140226.6 139238.1 139100.2
140000

120000

100000
$
80000 Profit Tax
(

m
59077.5 60838.8 Salaries Tax
)

57867.8
60000
Property Tax
40000

20000
2998 3371.7 3447.8
0
2015-2016 2016-2017 2017-2018
Financial year

 In the past 3 financial years, the profit tax has dropped

slightly from $140,226.6 million in 2015-2016, to
$139,100.2 million in 2017-2018, which has decreased
by 0.8% (corr. to 3 sig. fig.), reflecting a minor decrease
in profit tax collection.
 On the contrary, the salaries tax collection has risen
from $57867.8 million in 2015-2016, to $60838.8 million
in 2017-2018, which has risen 5.13% (corr. to 3 sig. fig).
It shows a steady increase of salaries tax collection.
 As for property tax, it has increased significantly from
$2998 million in 2015-2016, to $3447.8 million in 2017-
2018, which has risen 15% (corr. to 3 sig. fig.). It reflects
that the property tax has increased rapidly.
 Page 6

Task 2
Mr. Chow Occupation: Principal Annual salary Total allowances
$1,200,000 $132,000

The computation of salaries tax is as follows:

Total deductions = $ 0
Total allowances = $132,000
Net chargeable income = Total income –Total deductions –Total allowances
= $1,200,000 – $0 – $132,000
= $1,068,000

Net chargeable income Rate Tax

On the first $50,000 2% $1000
On the next $50,000 6% $3000
On the next $50,000 10% $5000
On the next $50,000 14% $7000
Remainder 17% $147,560
Salaries tax payable = $163,560

If the tax is charged at standard rate, tax payable = ($1,200,000 – $132,000) x15%
= $160,200
∴ Salaries tax payable by Mr. Chow = $160,200
 Page 7

Ms. Sin Occupation: Teacher Annual salary Total allowances

$720,000 $252,000

The computation of salaries tax is as follows:

Total deductions = $ 0
Total allowances = $252,000
Net chargeable income = Total income –Total deductions –Total allowances
= $720,000 – $0 – $252,000
= $468,000

Net chargeable income Rate Tax

On the first $50,000 2% $1000
On the next $50,000 6% $3000
On the next $50,000 10% $5000
On the next $50,000 14% $7000
Remainder 17% $45,560
Salaries tax payable = $61,560

If the tax is charged at standard rate, tax payable = ($720,000 – $252,000) x15%
= $70,200
∴ Salaries tax payable by Ms. Sin = $61,560
 Page 8

Mr. Ken Occupation: CEO Annual salary Total allowances

$30,000,000 $252,000

The computation of salaries tax is as follows:

Total deductions = $ 0
Total allowances = $252,000
Net chargeable income = Total income –Total deductions –Total allowances
= $30,000,000 – $0 – $252,000
= $29,748,000

Net chargeable income Rate Tax

On the first $50,000 2% $1000
On the next $50,000 6% $3000
On the next $50,000 10% $5000
On the next $50,000 14% $7000
Remainder 17% $5,023,160
Salaries tax payable = $5,039,160

If the tax is charged at standard rate, tax payable = ($30,000,000 – $252,000) x15%
= $4,462,200
∴ Salaries tax payable by Mr. Ken = $4,462,200
 Page 9

Mr. Rich Occupation: Hawker Annual salary Total allowances

$100,000 $182,000

The computation of salaries tax is as follows:

Total deductions = $ 0
Total allowances = $182,000
Net chargeable income = Total income –Total deductions –Total allowances
= $100,000 – $0 – $182,000
= – $82,000
∴ Salaries tax payable by Mr. Rich = $0

Mr. Justice Occupation: Lawyer Annual salary Total allowances

trainee $340,000 $264,000

The computation of salaries tax is as follows:

Total deductions = $ 0
Total allowances = $264,000
Net chargeable income = Total income –Total deductions –Total allowances
= $340,000 – $0 – $264,000
= $76,000

Net chargeable income Rate Tax

On the first $50,000 2% $1000
On the next $50,000 6% $1560
Salaries tax payable = $2,560

If the tax is charged at standard rate, tax payable = ($340,000 – $264,000) x15%
= $11,400
∴ Salaries tax payable by Ms. Justice = $2,560
 Page 10

Mr. Yeung Occupation: Doctor Annual salary Total allowances

$1,620,000 $132,000

The computation of salaries tax is as follows:

Total deductions = $ 0
Total allowances = $132,000
Net chargeable income = Total income –Total deductions –Total allowances
= $1,620,000 – $0 – $132,000
= $1,488,000

Net chargeable income Rate Tax

On the first $50,000 2% $1000
On the next $50,000 6% $3000
On the next $50,000 10% $5000
On the next $50,000 14% $7000
Remainder 17% $218,960
Salaries tax payable = $234,960

If the tax is charged at standard rate, tax payable = ($1,620,000 – $132,000) x15%
= $223,220
∴ Salaries tax payable by Mr. Yeung= $223,220
 Page 11

Task 3
Question 1
In 2016-17, only about 44% of the workforce was liable for salaries tax. Some people
suggested that the government should reduce the allowances so that more
workforce pays the salaries tax. Do you agree? Explain.

 No, I disagree with it.

Firstly, citizens who are not liable for salaries tax originally may not be financially
capable to pay the salaries tax. For the workforce that is not liable for salaries tax,
they mainly earn low income and have a great family burden each month. When the
government reduces the allowances, they will fall into the tax net and need to pay
tax. By asking them to pay taxes, this may add their economic burden and will lower
their living standard and quality of life.

Moreover, social discontent towards the government may be resulted. People who
are not used to pay tax in the past may refuse to pay and they may incite anarchism
or even a revolt, especially poor people and those organisations which help the poor
such as OXHAM. They may start to protest and it will eventually lead to chaos in the
society.

Also, the gap between the rich and the poor is large and the situation must be
improved to avoid anti-rich sentiment. The difference between a society’s rich and
poor is often measured using the Gini coefficient. The figure for Hong Kong was
0.539 in 2018, with zero indicating equality. The result was the highest in 45 years.
So, the government should raise the allowance instead of reducing them.
 Page 12

Question 2
The following table shows the salaries tax rate paid by the highest income earners in
different territories in 2009.
Territory France China UK USA Singapor HK
e
Highest 52% 45% 40% 35% 20% 15%
salaries tax
rate
Explain the advantage(s) and disadvantage(s) of maintaining a low salaries tax in HK.

 Advantages:
Firstly, this encourages the inflow of foreign talents and elite immigrants to work in
Hong Kong. This brings not only a better development for Hong Kong but also
competitiveness to the city.

Secondly, lower salaries tax can increase the workforce’s working incentive since they
can earn more income. Thus, their productivity at work can be raised. With more
direct financial reward, they can make more purchases and their spending power is
higher. These all result in higher GDP and a better quality of life.

 Disadvantages:
Firstly, lower salaries tax means that the source of government income is reduced.
With limited capital, the welfare it provides is much less than other countries. For
example, USA spent 16.0% of GDP on health care with 40% salaries tax rate but health
expenditure only accounts for5.5% of GDP in Hong Kong.

Futhermore, since Hong Kong’s salaries tax rate is much lower than other countries,
the revenue that the government received is lowered as well. Therefore, policies
requiring a lot amount of capitals could not be carried out successfully.