Tax revenue in the 2007-08 financial year soared 29.4 percent from the previous year and reached HK$200.7 billion, breaking historic record, thanks to a robust economic growth.

The surge is bigger than what the government expected.

"This proves that the economy in 2006-07 was very prosperous," Commissioner of Inland Revenue Alice Lau Mak Yee-ming said at a press conference yesterday.

"The significant growth in business profits and a general increase in salary income are contributing factors," he added.

In particular, stamp duty saw the biggest surge and more than doubled to HK$52 billion.

Lau attributed the notable growth to the active stock market.

A total of HK$134 billion was collected in salaries and profits taxes which constitute approximately 70 percent of the total revenue last year.

Among the yield, profits tax jumped 27 percent to HK$91 billion. Lau said profits tax collected from insurance and property investment was particularly high.

Due to a 50 percent tax reduction in salaries tax last year, the Inland Revenue Department (IRD) received three percent less from the tax category. Yet the overall growth in assessable income in the year reached 8.5 percent.

The majority of salaries tax income came from high-income earners.

Last year 71.2 percent of salaries tax was collected from the top 100,000 income earners of the total 1,325,000 taxpayers.

Taxpayers with an annual income exceeding HK$900,000 paid relatively higher salaries tax as the government tax concessions mainly benefited the low-income group and middle class, Lau said.

However, Raymond So, professor of the finance department of the Chinese University of Hong Kong, said such a preferential arrangement for the low- and medium-income groups might not alleviate their financial burden much as they have to pay high mortgages.

Meanwhile, Lau said tax arrears last year have improved. The percentage of arrears over the assessed tax dropped to 3.6 percent from 4.3 percent last year.

However, the IRD predicted an overall 20 percent revenue decrease for the 2008-09 fiscal year after several tax concessions.

The Financial Secretary proposed a one-off reduction of 75 percent of salaries tax, profits tax, property tax and tax under personal assessment in the 2007-08 financial year, subject to a ceiling of HK$25,000. Hence Lau projected a 50 percent plunge in salaries tax.

Also she estimated a 32 percent drop in stamp duty, but added it is always a challenging job to assess stamp duty due to the volatile stock market.

(HK Edition 05/06/2008 page1)