Legislative Council

LC Paper No. LS 181/98-99

Object of the Bill

To improve the tax reserve certificates (TRCs) system by:

1. abolishing paper certificates for normal TRCs and replacing it by scripless TRCs, and
   
   
2. paying TRCs interest at moving rates prescribed for conditional TRCs.

LegCo Brief Reference

2. FIN CR 3/2306/54 dated 5 May 1999 issued by the Finance Bureau.

Date of First Reading

3. 19 May 1999.

Comments

4. There are two kinds of TRCs, namely normal TRCs which are purchased by taxpayers who wish to prepare for tax payment in future and conditional TRCs which the Commissioner for Inland Revenue requires taxpayers who have objected to their tax assessments to purchase in order to cover the total amount or part of the tax in dispute.

5. Normal TRCs were previously issued only in the form of paper certificates. Clauses 2, 3 and 4 of the Bill propose to abolish the issue of paper certificates for normal TRCs and replace it by scripless TRCs. The Commissioner of Inland Revenue is empowered to maintain electronic accounts for all purchasers of normal TRCs.

6. Clause 6 proposes that the interest on conditional TRCs should be calculated by applying the interest rate in force from time to time for the tenure of the TRCs. As for normal TRCs, simple fixed interest rate mechanism still applies.

7. Consequential amendments are made to the Inland Revenue Ordinance and its subsidiary legislation.

Public Consultation

8. No public consultation has been carried out.

Consultation with the LegCo Panel

9. The Deputy Secretary for the Treasury briefed members of the Panel on Financial Affairs on 1 March 1999. (Please refer to LC Paper No. CB(1)914/98-99(05)). The Panel has not raised any adverse comments on the proposals.

Conclusion

10. The Bill does not involve any major changes in policy and only seeks to improve the procedure in the issuing of TRCs. To pay interests which are in force from time to time over the tenure of the TRCs is considered to be fairer and beneficial to conditional TRCs holders. The Legal Service Division has sought clarification with the Administration on the drafting of the Bill, in particular, on who should have the authority to prescribe rules under the proposed new section 3(1AA). The Administration has agreed to propose a Committee Stage amendment on the relevant clause. Please see Annex for the correspondences. With the proposed Committee Stage amendment, we are satisfied that the drafting and legal aspects of the Bill are in order. Subject to members' views, a Bills Committee may not be necessary and Second Reading debate may be resumed.

Encl


Prepared by
HO Ying-chu, Anita
Assistant Legal Adviser
Legislative Council Secretariat
17 May 1999

a:Bill/LS181e.doc(LS/B/82/98-99)