LegCo Paper No. CB(1) 1338/95-96
(These notes have been seen
by the Administration)
Ref : CB1/BC/18/95/1

Bills Committee to study the
Road Traffic (Amendment) (No. 3) Bill 1995
Eastern Harbour Crossing Road Tunnel (Passage Tax)Bill
& Inland Revenue (Amendment) (No. 4) Bill 1995

Notes of the First Meeting held
on Tuesday, 19 March 1996 at 8:30 am
in Conference Room B of the Legislative Council Building

Present :

    Hon Mrs Selina CHOW, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Hon CHAN Kam-lam
    Hon CHAN Wing-chan
    Hon NGAN Kam-chuen

Absent with Apologies :

    Hon Eric LI Ka-cheung, JP
    Hon Zachary WONG Wai-yin
    Hon Paul CHENG Ming-fun
    Dr Hon LAW Cheung-kwok
    Hon SIN Chung-kai
    Hon TSANG Kin-shing

By invitation :

From the Administration
Deputy Secretary for Transport
Mr Augustine L S CHENG
Principal Assistant Secretary for Transport
Mr A K Gill
Deputy Commissioner of Inland Revenue
Mrs Spring Y C FUNG
Senior Assistant Law Draftsman
Mr LEE Shu-chee
Assistant Commissioner for Transport

In attendance:

Ms Kitty CHENG
Assistant Legal Adviser 2
Mrs Vivian KAM
Chief Assistant Secretary (Panels)2
Mr Billy TAM
Senior Assistant Secretary (Panels)4

Election of Chairman

Hon CHAN Kam-lam was elected the Chairman of the Bills Committee.

Meeting with the Administration

2. The Chairman drew Members' attention to the Administration's response to the six written representations, and an additional two representations tabled at the meeting. He then welcomed representatives of the Administration and invited Mr Paul LEUNG to brief Members on the three Bills and the estimated effectiveness of these Bills for easing traffic congestion.

Briefing by the Administration

3. Mr Paul LEUNG advised that the three proposed Bills stemmed from the Report of the Working Party on Measures to Address Traffic Congestion issued in 1994. Following a public consultation exercise in late 1994 and a Legislative Council motion debate in early 1995, the recommendations of the Working Party were further examined having regard to feedback collated. Proposals which received little support or which were difficult to implement were dropped, while the feasible recommendations were being implemented in stages. The current three Bills were part of the package for solving the problem of traffic congestion.

4. On the proposed amendments to the Road Traffic Ordinance, Mr LEUNG emphasised that the Administration had no intention to raise the annual licence fees and the first registration tax for the time being. Statutory powers were however required to enable the Governor-in-Council to raise annual licence fees for reasons other than cost recovery should this prove necessary in future. He added that actual increases would be subject to the approval of the Legislative Council under the positive resolution procedure.

5. For the proposed Eastern Harbour Crossing Road Tunnel (Passage Tax) Bill, Mr LEUNG explained that the purpose was to enact an Ordinance similar to the Cross Harbour Tunnel (Passage Tax) Ordinance to make possible the imposition of a passage tax if this became necessary. He supplemented that proposals on the timing and the amount for such taxes would be submitted to the Executive Council for consideration, and actual implementation would also be subject to the approval of the Legislative Council under the positive resolution procedure.

6. Mr LEUNG further advised that the Administration planned to remove the tax concessions for business-owned cars by introducing amendments to the Inland Revenue Ordinance. He said that about 25% of the registered cars were company private cars which were enjoying different kinds of tax benefits, and the Administration was of the view that such concessions might provide a positive incentive for companies to own private cars. Amendments to the Inland Revenue Ordinance had therefore been proposed to discourage ownership.

General Discussions

Road Traffic (Amendment) (No. 3) Bill 1995

Eastern Harbour Crossing Road Tunnel (Passage Tax) Bill

7. Members were of the view that two Bills were unnecessary when there were no actual plans for increase and given that increases could be imposed anyway at the time when the Financial Secretary announced the Budget. In respect of the Eastern Harbour Crossing Road Tunnel (Passage Tax) Bill in particular, Members were doubtful of its need in view of the impending operation of the Western Harbour Crossing (WHC) in 1997 which would ease cross harbour traffic considerably. They also asked for the reason for non-inclusion of the passage tax clause at the time when Eastern Harbour Crossing (EHC) became operational.

8. Mr LEUNG clarified that although the legislation would not be made use of for the time being, legislative power was required in case of need. As legislative procedures might take nine months or more to complete, this might not be able to cope with urgent needs for easing traffic congestion. As regards the WHC, its effect on traffic in the two existing tunnels was as yet uncertain. If congestion at the EHC worsened before operation of the WHC, imposition of passage tax for the former might be warranted. Mr Augustine CHENG supplemented that when the EHC commenced operation, the expectation was that traffic congestion would ease considerably and hence introduction of a passage tax was not deemed necessary. After the tunnel became operational and with the construction of road networks in the area however, traffic in the EHC was becoming increasingly congested than had been expected. The new law was therefore needed as part of the traffic management measures.

Inland Revenue (Amendment) (No. 4) Bill 1995

9. Members were of the view that any proposal for alleviating traffic congestion must be an effective measure pinpointed specifically at the problem. It was inappropriate for a traffic problem to be resolved through taxation means. They were worried that the Bill in question was a revenue-raising exercise and they also doubted the effectiveness which removal of tax concessions for company private cars would have on alleviating traffic congestion. They asked if this represented a change in the Administration's tax policy.

10. Mr LEUNG emphasised that the proposed withdrawal of tax concessions was only part of a series of measures to reduce traffic congestion. He added that 78% of respondents to an independent survey had either agreed with the proposal or had no strong views. Legislative Councillors in the last session had also not objected to the measure as indicated during the motion debate in early 1995. On this, some Members clarified that the non-objection at the time was conditional upon the genuine effectiveness of the measure in alleviating traffic congestion. Members said the Administration was using public opinion to support its proposal to remove tax concessions from business-owned cars but ignoring public objection to the fiscal measures. Mr LEUNG said that in certain circumstances the Administration could not only take account of public opinion. He added that fiscal measures were never popular, and in formulating effective measures, the Administration had to balance public opinion with other considerations.

11. In continuing, Mr LEUNG advised that 40% of cars on the roads during rush hours were private cars of which 40% were owned by companies. In effect, 16-18% of cars on the roads during rush hours were company private cars. Although company private cars were not the only cause for traffic congestion, their substantial contributory impact could not be ignored. The Administration believed that the proposed bill would induce companies into reviewing their needs for private cars so that in the long run, the number of registered company private cars could reduce.

12. Members asked for an estimate on the number of cars that would be reduced as a result of the proposed measure. Mr LEE Shu-chee and Mr CHENG explained that in the Second Comprehensive Transport Study (CTS 2), the consultants had built up a computer model with programmes analysing the impact of car operating costs on the growth in vehicle numbers. According to the computation results, 8,500 of the present 71,000 (12%) company private cars would be reduced. The reduction however would not be immediate but would spread over a certain period. Some Members were of the view that such an overall assumption might not be indicative of the specific effect which the draft Bill would have on the number of company-owned private cars, and suggested that consideration be given to conducting a study on the specific effect of the draft Bill. They requested the Administration to provide after the meeting the factors used in the computer model of the CTS 2, the findings of the CTS 2 relating to the effect of increased car operating costs on the growth in number of vehicles, and to confirm if this was applicable to private cars only.

13. Since the Inland Revenue Department already had the power to disallow depreciation allowances for abused use of company private cars, Members questioned the merit of introducing the Bill in question. They considered it unfair to penalise business car users, for example public utility companies and the press, by disallowing their entitled depreciation allowances and deductible expenses. On the rationale for granting such tax concessions in the past, Mr A K Gill explained that the general accepted tax practice was to allow the deduction of expenses relating to the production of assessable profits in the profits tax computation of companies.

14. Members also felt that unlike private cars owned by individuals which might not be a necessity, company-owned private cars were normally for genuine business needs. Similar to other machinery and plant, these were essential tools for conducting business. The withdrawal of tax concessions would unduly victimise these companies and affect their business. Members questioned if regard had been given to the prevailing economic situation and the decline in car sales by 30% since 1994. They also asked if the Administration had considered the economic loss which would be caused by the change in the mode of operation due to the withdrawal of tax concessions.

15. Mr LEUNG reckoned that every policy might have an adverse effect on certain parties but the effect of the Bill in question should not be to such an extent as to result in the closure of businesses. Furthermore, its implications would already have been considered by the Executive Council, the membership of which was from different sectors, before the proposal was endorsed. Companies should be able to streamline their work flows to adapt to any change in their modes of operation. Mr LEUNG cautioned that the estimated economic loss resulting from traffic congestion in Hong Kong amounted to over $8 million a day, or over $3 billion a year. The proposed measure would contribute towards reducing such a loss, as a result of which both the business and the consumers might benefit.

16. A Member expressed concern on the possibility that companies forced to give up private cars might turn to car-hire. Under such circumstances, not only would the proposal Bill be in-effective in reducing the number of cars on the road but it would also increase the operating expenses of these companies as the car rental companies had to include a profit element in renting out the cars. In reply, Mr LEUNG explained that the proposal had no intention of increasing operating costs. Its objective was to give equitable treatment to company-owned and individual-owned private cars alike.

17. In response to Members on the number of vehicles on the roads, Mr LEUNG and Mr CHENG provided the following statistics:

  1. number of licensed motor vehicles, with the percentage increase over the previous month in brackets:
Month Number

August 95


September 95

284,785 (0.04%)

October 95

285,026 (0.08%)

November 95

285,468 (0.15%)

December 95

285,467 (0%) (with comparative figure of 279,420 in December 94)

January 96

285,462 (0%)

  1. number of Government motor vehicles(all types) and motor cycles:
Month Number

December 94

6,157 plus 1,321 motor-cycles

August 95

5,875 plus 1,245 motor-cycles

December 95

5,961 plus 1,322 motor-cycles

18. Members made reference to the Administration's stated policy of imposing control when the growth rate of new car registration exceeded 2% to 3%, and questioned the need for the control measure when the increase was well below 2% as outlined above. Members sought further information on:

  1. the number of privately-owned and company-owned cars, with a further breakdown of the latter by profit-making and non-profit-making organisations;
  2. the age profile of company-owned cars and their distribution profile among companies; and
  3. statistics on the number and categories of Government vehicles since 1994, and the rationale for the decrease in the number of such vehicles by about 200 between August and December 1995.

19. Before concluding, the Chairman urged the Administration to respond to concerns raised by Members during the meeting. As Members noted that the Administration had only commented selectively on points raised in the six written representations, they asked for a more detailed and comprehensive response.

Dates of next meetings

20. Members agreed to schedule two meetings on 11 April at 10:45 am and on 15 April at 4:30 pm to meet deputations, and requested that these be held in the Chamber of the Legislative Council Building in anticipation of the large number of reporters and deputations. The Administration would be welcome to attend these sessions to obtain feedback. Members also agreed that in the event that bilingual papers were not available simultaneously, the original copy of the papers would first be circulated, to be followed by the translation copy as soon as possible.

21. There being no other business, the meeting ended at 10:15 am.

LegCo Secretariat
1 May 1996

Last Updated on 23 Apr, 1997