6 May 1999
Ms Estella Chan
Clerk to Bills Committee
Legislative Council Secretariat
Legislative Council Building
8 Jackson Road
Dear Ms Chan,
Bills Committee on
Companies (Amendment) Bill 1999
Meeting on 7 May 1999
Thank you for your letter dated 21 April 1999. As requested by the Bills Committee at the meeting of 20 April 1999, I append below the information on the two questions raised: -
(1) An analysis of the 1,305 cases of objections raised by the Commissioner of Inland Revenue (CIR) against striking off by the Registrar of Companies (R of C) under section 291 of the Companies Ordinance and the amount of tax money involved
Within the time available, the Inland Revenue Department (IRD) has examined 1,037 (about 80%) of the 1,305 cases. On the basis of these findings, the total amount of "tax at risk" involved in all cases is estimated to be $300 million, comprising approximately $290 million of profits tax and legal and judgement interests of approximately $10 million.
In respect of the amount of tax involved in the cases examined, approximately 18% are eventually ascertained to have no tax liabilities. Of the remaining 82%, about 17% involved tax liabilities up to $10,000, nearly 60% involved tax liabilities ranging from $10,001 to $500,000, and 7.3% involved tax liabilities exceeding $500,000.
(2) Cost analysis of the $350 chargeable for the Issuance of the "No-objection" Notice by IRD
In order to meet the new demand arising from the Companies Registry's de-registration service, the IRD will set up a dedicated team of 11 officers in the department to handle an estimated 24,000 applications per year. The IRD has considered that with the additional resources the department will be able to provide an enhanced service and to meet its performance pledge of providing a reply of "objection" or "no objection" within one month to the applicants. A cost statement and a list of the duties of the dedicated team are at Annex A
The CIR wishes to stress that the tax clearance procedure is an integral part of the new de-registration arrangement proposed under the new section 291AA which aims to provide a fast, simple and inexpensive option to member's voluntary winding-up. The provision of this simplified procedure must be balanced by the Government's need to protect public revenue. The abuse statistics have shown that substantial amount of public revenue will be at risk if there is no tax clearance procedure. The new section 291AA(3) provides the necessary protection to public money which is in the interest of the entire community.
( Miss Julina Chan )
for Secretary for Financial Services
cc: CIR (Attn: Miss Grace Tse)
R of C (Attn: Mr G W E Jones)
D o J (Attn: Miss Shandy Liu)
Additional Administrative Costs Incurred By IRD for
Handling Applications for Notice of No Objection
Under Section 291AA of the Companies Ordinance (Chapter 32)
|Miscellaneous supporting cost e.g. postages, stores etc.||97,000
|Number of application per annum||(b)||24,000
|Unit Cost per application||(a)/(b)||348
Summary of duties of staff required for the processing ofProfessional staff
Applications for Deregistration under Section 291AA
- Processing of initial applications and re-submit cases.
- Liaison and co-ordination with officers in other Units and sections administering different types of tax to assist the applicants to clear their tax obligations.
- Attending to technical enquires and interviews.
- Issuing Notice of Objection/No objection.
- Supervising the supporting staff.
- Preparing management reports.
- Receipt of the application fee and conduct preliminary screening of applications.
- Registration and checking the validity of the application.
- Conducting computer on-line checks and enquiries.
- Despatching of applications and relevant papers and documents to professional staff for detailed examination.
- File maintenance.
- Typing and despatching the Notices of Objection/No Objection.
- Preparing work reports and keeping statistics of applications.
- Attending to general telephone enquiries.