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Chapter 2 Literature Review. 2.1 Fact On Hong Kong Tax

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Chapter 2 Literature Review

2.1 Fact on Hong Kong Tax System
2.1.1 Current Hong Kong Tax System
Taxes are use to shift resources from the private sector, including households and businesses, to the public sector. Due to this transfer, government is able to pay for the goods, services, and government operations expenditure. Levy tax also allows a government reallocating the resources(Engen and Skinner, 1996). If a government can reducing administrative costs of tax collection, minimize the tax evasion, maximize the tax base, taxing will be an effective way to raise revenues and to support government operation (Tanzi and Zee, 2000). In the other word, by levying tax, it is possible for government to redistribution of wealth since government
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The standard rate levied on the corporations is 16.5% in Year of Assessment 2008/09 onwards, while the tax rates applicable to unincorporated Business is 15% in YA 2008/09 onwards for resident(HKSAR, 2016 a). Non-resident will be chargeable to Profit tax only if the profits arising in or derived from Hong Kong under his or her name directly or the agent. For the Non-Resident Entertainers and Sportsmen or person, tax rate is 15% from YA2008/09 onward, while the non-resident agent that is a corporate agent or a corporation will be charge on 16.5%.

Salary tax is “charged on every person in respect of income arising in or derived from Hong Kong from Office, Employment of profits or Pension” under Section 8(1) of IRO. Including wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, allowance, and any income from employer or others under Section 9 and Section 11B of IRO.

Taxpayer is entitle to claim following deduction, 1. Outgoing and expenses (under IRO s.12(1)(a)), 2. Depreciation allowance (under s12(1)(b)), 3. Self-education expenses (under s12(1)(e)), 4. Loss bought forward and set-off (under s12(1)(c)), 5. Concessionary Deductions (including approved charitable donation under s26C, elderly residential care expenses under s.26D, home loan interest under s.26E and contributions to recognized retirement schemes under s.26G) and
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