A BILL

To

Amend the Inland Revenue Ordinance.

Enacted by the Provisional Legislative Council.

1.Short title

This Ordinance may be cited as the Inland Revenue (Amendment) Ordinance 1998.

2.Application

  1. Subject to subsection (2), this Ordinance applies in relation to the year of assessment commencing on 1 April 1998 and to all subsequent years of assessment.
  2. Sections 9, 12 (only in so far as that section relates to the addition of the new section 26G) and 22 (only in so far as that section relates to the addition of the new Schedule 3B) apply in relation to the year of assessment to be appointed by the Secretary for the Treasury by notice in the Gazette and to all subsequent years of assessment.

3.Interpretation

Section 2(1) of the Inland Revenue Ordinance (Cap. 112) is amended---

    1. in the definition of "recognized occupational retirement scheme", in paragraph (e), by adding "other than the Mandatory Provident Fund Schemes Ordinance (Cap. 485)" after "Ordinance";
    2. by adding---

""grandparent or grandparent of his or her spouse" (該人的或其配偶的祖父母或外祖父母), in relation to any person, means---

    1. a natural grandfather or grandmother of the person or his or her spouse;
    2. an adoptive grandparent of the person or his or her spouse (whether an adoptive parent of a natural parent, adoptive parent or step parent of the person or his or her spouse, or a natural parent of an adoptive parent of the person or his or her spouse);
    3. a step grandparent of the person or his or her spouse (whether a step parent of a natural parent, adoptive parent or step parent of the person or his or her spouse, or a natural parent of a step parent of the person or his or her spouse); or
    4. in the case of a deceased spouse, a person who would have been the grandparent of the person's spouse by reason of any of the provisions of paragraphs (a) to (c) if the spouse had not died;

"mandatory contributions" (強制性供款) means any amount that is required to be paid as a contribution to a mandatory provident fund scheme in accordance with the Mandatory Provident Fund Schemes Ordinance (Cap. 485);

"mandatory provident fund scheme" (強制性公積金計劃) means a registered scheme as defined in section 2 of the Mandatory Provident Fund Schemes Ordinance (Cap. 485);

"parent or parent of his or her spouse" (該人的或其配偶的父或母), in relation to any person, means---

    1. a parent of whose marriage the person or his or her spouse is the child;
    2. the natural father or mother of the person or his or her spouse;
    3. a parent by whom the person or his or her spouse was adopted;
    4. a step parent of the person or his or her spouse; or
    5. in the case of a deceased spouse, a person who would have been the parent of the person's spouse by reason of any of the provisions of paragraphs (a) to (d) if the spouse had not died;
"recognized retirement scheme" (認可退休計劃) means---
  1. a recognized occupational retirement scheme; or
  2. a mandatory provident fund scheme;".

4.Salaries tax on spouses to be paid separately unless they elect to be jointly assessed

Section 10(2)(a) is amended---

    1. by repealing "allowances under Part V which" and substituting "deductions under Part IVA and allowances under Part V which, in aggregate,";
    2. by repealing "as reduced by approved charitable donations under section 12B(1)(a)".

5.Ascertainment of net chargeable income

Section 12B is amended---

    1. by repealing subsection (1)(a) and substituting---
    2. "(a)such deductions as are under Part IVA allowable to that person; and";

    3. by repealing subsection (2)(a) and substituting---

"(a)such deductions as are under Part IVA allowable to them; and".

6.Charitable donation

Section 12BA is repealed.

7.Calculation of salaries tax

Section 13(2) is amended---

    1. in paragraph (a), by repealing "approved charitable donations provided for under section 12BA" and substituting "such deductions as are under Part IVA allowable to the person";
    2. in paragraph (b), by repealing "approved charitable donations provided for under section 12BA" and substituting "such deductions as are under Part IVA allowable to them".

8.Ascertainment of chargeable profits

Section 16(1)(ga) is amended by adding "16AA," before "16B,".

9.Section added

The following is added---

"16AA. Mandatory contributions in self-employment cases allowable as a deduction

    1. Subject to subsection (2), where a person carrying on a trade, profession or business in Hong Kong as a sole proprietor or as a partner in a partnership pays any mandatory contributions in the basis period for any year of assessment in respect of any liability of himself to pay such contributions as a self-employed person under the Mandatory Provident Fund Schemes Ordinance (Cap. 485), the payment shall be deemed to be an expense wholly and exclusively incurred in the production of the profits of that trade, profession or business chargeable to tax under this Part and shall be allowed as a deduction from such profits for that year of assessment.
    2. deduction shall not be allowable to a person under subsection (1) for any year of assessment---
    1. in respect of any sum which is allowable as a deduction under any other sections of this Part or section 26G;
    2. in excess of the amount specified in Schedule 3B in relation to that year of assessment, as reduced by the amount of any sum which is allowable to that person as a deduction under any other sections of this Part or section 26G.".

10.Approved charitable donations

Section 16D(2) is amended---

    1. in paragraph (a), by repealing "12BA,";
    2. by adding---

"(aa) any sum which is allowable as a deduction under Part IVA;".

11.Deductions not allowed

Section 17 is amended---

(a)

by repealing subsection (1)(a) and substituting---

 

"(a)

domestic or private expenses, including---

   

(i)

the cost of travelling between the person's place of residence and place of business; and

   

(ii)

subject to section 16AA, contributions paid to a mandatory provident fund scheme in the person's capacity as a person participating in the scheme;";

       
(b)by repealing subsection (2) and substituting---

"(2) In computing the profits or losses of a person carrying on a trade, profession or business, no deduction shall be allowable for---

(a) subject to paragraph (b)---

(i) salaries or other remuneration of the person's spouse;

(ii) interest on capital or loans provided by that spouse;

(iii) any contribution paid to a mandatory provident fund scheme in respect of that spouse; or

(b) in the case of a partnership---

(i) salaries or other remuneration of a partner or a partner's spouse;

(ii) interest on capital or loans provided by a partner or a partner's spouse;

(iii) subject to section 16AA, any contribution paid to a mandatory provident fund scheme in respect of a partner or a partner's spouse.".

12. Part IVA added

The following is added---

"PART IVA
Concessionary Deductions

26B. Concessionary deductions, general provisions

(1) This Part prescribes the deductions which shall be allowable to persons chargeable to tax under Part III or VII and the circumstances in which such deductions shall be so allowable.

(2) Every person who claims a deduction under this Part shall make his claim in the specified form and the person shall be allowed a deduction only if the claim contains such particulars and is supported by such proof as the Commissioner may require.

(3) In this Part---

"deduction" (扣除) means a deduction allowable under this Part;

"person" (人) means a person chargeable to tax under Part III or VII, as the case may be.

26C. Approved charitable donations

(1) Subject to the other provisions of this section, where a person or his or her spouse, not being a spouse living apart from the person, makes any approved charitable donations during any year of assessment, a deduction in respect of the aggregate amount of the approved charitable donations shall be allowable to the person for that year of assessment, if in any case such aggregate amount is not less than $100.

(2) (a) Subject to paragraph (b), where a person is chargeable to tax under Part III, no deduction shall be allowable to the person under subsection (1) for any year of assessment in respect of---

(i) any sum which is allowable as a deduction under Part IV;

(ii) any sum by which the aggregate amount of the approved charitable donations within the meaning of subsection (1) is in excess of 10% of---

(A) subject to sub-subparagraph (B), the assessable income of the person for that year of assessment as reduced by the deductions provided for under section 12(1)(a) and (b) for that year of assessment; or

(B) where the person and his or her spouse have made an election under section 10(2) for that year of assessment, the aggregate of their assessable incomes for that year of assessment as reduced in each case by the deductions provided for under section 12(1)(a) and (b) for that year of assessment.

(b) Where a person has made an election under section 41 in respect of any year of assessment, no deduction shall be allowable to the person under subsection (1) for that year of assessment in respect of---

(i) any sum which is allowable as a deduction under Part IV;

(ii) any sum which has been allowed as a deduction to his or her spouse against the total income of that spouse that is required to be aggregated with that of the person under section 42A(1);

(iii) any sum by which the aggregate amount of the approved charitable donations within the meaning of subsection (1) is, when aggregated with any sum that is allowable as a deduction under section 16D for that year of assessment, in excess of 10% of the total amount of---

(A) the total income of the person for that year of assessment;

(B) any sum which is allowable as a deduction under section 16D for that year of assessment; and

(C) any sum which is allowable as a deduction under section 12(1)(e) for that year of assessment.

(3) (a) Subject to paragraph (b), the same approved charitable donation shall not be allowable as a deduction under this section in ascertaining the net chargeable income or the total income of more than one person.

(b) Where a deduction of the same approved charitable donation is claimed or allowed in ascertaining the net chargeable income or the total income of more than one person, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as it does to a dependent parent allowance, a dependant grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance; and section 33 shall, where this paragraph applies, be construed as if a reference therein to such an allowance included , in the case of an approved charitable donation so claimed, a reference to an allowance to which section 33(2) applies and, in the case of an approved charitable donation so allowed, a reference to an allowance to which section 33(3) applies.

26D. Elderly residential care expenses

(1) Subject to the other provisions of this section, where a person or his or her spouse, not being a spouse living apart from the person, pays during any year of assessment any residential care expenses in respect of a parent or grandparent of the person who at any time in that year of assessment is aged 60 or more or, being under the age of 60, is eligible to claim an allowance under the Government's Disability Allowance Scheme, a deduction in respect of the residential care expenses shall be allowable to that person for that year of assessment.

(2) A deduction under subsection (1) is allowable to a person in respect of each parent or grandparent of the person, in so far as any residential care expenses described in that subsection have been paid by the person or his or her spouse in respect of that parent or grandparent.

(3) A deduction allowable to a person under subsection (1) in respect of each parent or grandparent of the person for any year of assessment shall not exceed the amount specified in Schedule 3C in relation to that year of assessment.

(4) (a) Subject to paragraph (b), a deduction in respect of any residential care expenses shall not be allowable under this section to more than one person for any year of assessment in respect of the same parent or grandparent.

(b) Where a deduction in respect of any residential care expenses is claimed by or allowed to more than one person for any year of assessment in respect of the same parent or grandparent, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as it does to a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance; and section 33 shall, where this paragraph applies, be construed as if a reference therein to such an allowance included, in the case of any residential care expenses so claimed, a reference to an allowance to which section 33(2) applies and, in the case of any residential care expenses so allowed, a reference to an allowance to which section 33(3) applies.

(5) In this section---

"parent or grandparent" (父母或祖父母), in relation to any person, means---

(a) a parent or parent of his or her spouse; or
(b) a grandparent or grandparent of his or her spouse;

"residential care expenses" (住宿照顧開支) means any expenses payable in respect of the residential care received at a residential care home and paid to that residential care home or any other person acting on its behalf;

"residential care home" (安老院) means any premises---

(a) in respect of which a licence issued or renewed under the Residential Care Homes (Elderly Persons) Ordinance (Cap. 459) is for the time being in force;

(b) in respect of which a certificate of exemption issued or renewed under that Ordinance is for the time being in force;

(c) to which that Ordinance does not apply by virtue of section 3 of that Ordinance; or

(d) which is a nursing home in respect of which any person has been registered under section 3 of the Hospitals, Nursing Homes and Maternity Homes Registration Ordinance (Cap. 165).

26E. Home loan interest



(1)

Subject to the other provisions of this section and to section 26F, where a person pays during any year of assessment any home loan interest for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by the person exclusively or partly as his place of residence, a deduction in respect of the home loan interest shall be allowable to that person for that year of assessment.

(2)

(a)

Subject to paragraphs (b) and (c) and subsection (3), a deduction allowable to a person under subsection (1) in respect of any home loan interest paid by the person during any year of assessment shall be---

   

(i)

(A)

where the dwelling is used by the person exclusively as his place of residence during the whole of that year of assessment, the amount of the home loan interest paid; or

     

(B)

in any other case, such amount (whether representing the full amount of the home loan interest paid or any part thereof) as is, in the opinion of the Commissioner, reasonable in the circumstances of the case; or

   

(ii)

the amount specified in Schedule 3D in relation to that year of assessment,

whichever is of the lesser amount.

 

(b)

For the purposes of this section, where a dwelling is held by a person otherwise than as a sole owner, the amount of the home loan interest paid referred to in paragraph (a)(i) shall be regarded as having been paid---

   

(i)

where the dwelling is held by the person as a joint tenant, by the joint tenants each in proportion to the number of the joint tenants; or

   

(ii)

where the dwelling is held by the person as a tenant in common, by the tenants in common each in proportion to his or her share in the ownership in the dwelling.

 

(c)

For the purposes of paragraph (a), where a dwelling is held by a person otherwise than as a sole owner, the relevant amount specified in Schedule 3D referred to in paragraph (a)(ii) shall be regarded as having been reduced---

   

(i)

where the dwelling is held by the person as a joint tenant, in proportion to the number of the joint tenants; or

   

(ii)

where the dwelling is held by the person as a tenant in common, between the tenants in common each in proportion to his or her share in the ownership in the dwelling.

(3)

(a)

Where any home loan interest is paid by a person during any year of assessment for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by that person exclusively or partly as his place of residence, but the loan was not applied wholly for the acquisition of the dwelling, the deduction allowable to the person under subsection (1) for that year of assessment in respect of the home loan interest paid shall be such part of the amount of the home loan interest paid as is, in the opinion of the Commissioner, reasonable in the circumstances of the case.

 

(b)

Where any home loan interest is paid by a person during any year of assessment for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by that person exclusively or partly as his place of residence, but the person has paid during that year of assessment any other home loan interest for the purposes of a home loan obtained in respect of any other dwelling which is also used at any time in that year of assessment by that person exclusively or partly as his place of residence, a deduction shall, subject to subsection (4), be allowable to the person under subsection (1) for that year of assessment in respect of both the first-mentioned home loan interest and the second-mentioned home loan interest, and the deduction so allowable shall be such amount (whether representing the full amount of the aggregate of the respective amounts of the first-mentioned home loan interest and the second-mentioned home loan interest or any part thereof) as is, in the opinion of the Commissioner, reasonable in the circumstances of the case.

(4)

A deduction shall not be allowable under this section to a person in respect of any home loan interest paid during any year of assessment for the purposes of a home loan obtained in respect of a dwelling where---

 

(a)

the sum representing the home loan interest is allowable as a deduction under any other section of this Ordinance;

 

(b)

any other home loan interest paid in respect of any other dwelling has been allowed to the person as a deduction for that year of assessment under this section other than by virtue of subsection (3)(b); or

 

(c)

a deduction has been allowed to the person under this section whether in respect of the same dwelling or in respect of any other dwelling for 5 years of assessment (whether continuous or not).

(5)

For the purposes of subsection (4)(c), where a deduction allowable to a person under this section has been taken into account in any year of assessment in ascertaining---

 

(a)

subject to paragraphs (b) and (c), the net chargeable income of the person;

 

(b)

where the person and his or her spouse have made an election under section 10(2), the net chargeable income of the person or his or her spouse; or

 

(c)

where the person or the person and his or her spouse have made an election under section 41, the total income of the person,

 

The person shall be deemed to have been allowed the deduction under this section for that year of assessment.

(6)

(a)

A claim by a person to a deduction allowable to him under this section may only be revoked within 6 months after the date on which the deduction is allowed to him under this section.

 

(b)

Where a claim is revoked under paragraph (a), the claim shall be deemed not to have been made.

(7)

The Commissioner may, for the purposes of this section, approve in writing any organization or association as a recognized organization or association.

(8)

For the purposes of this section, where a person pays any home loan interest for the purposes of a home loan obtained in respect of a dwelling which is used by that person exclusively or partly as his place of residence in the circumstances described in subsection (1), and the home loan was applied also for the acquisition of any car parking space valued together with the dwelling as a single tenement under section 10 of the Rating Ordinance (Cap. 116), such car parking space shall be deemed---

 

(a)

to be part and parcel of the dwelling; and

 

(b)

to be used by that person in the same manner and to the same extent as the dwelling is used as his place of residence.

(9)

In this section---

"dwelling" (住宅) means any building or any part of a building---

 

(a)

which is designed and constructed for use exclusively or partly for residential purposes; and

 

(b)

the rateable value of which is separately estimated under section 10 of the Rating Ordinance (Cap. 116);

 

"home loan" (居所貸款), in relation to a person claiming a deduction under this section for any year of assessment, means a loan of money which is---

 

(a)

applied wholly or partly for the acquisition of a dwelling which---

   

(i)

during any period of time in that year of assessment is held by the person as a sole owner, or as a joint tenant or tenant in common; and

   

(ii)

during that period of time is used by the person exclusively or partly as his place of residence; and

 

(b)

secured during that period of time by a mortgage or charge over that dwelling or any other property in Hong Kong;

 

"home loan interest" (居所貸款利息), in relation to a person claiming a deduction in respect of a dwelling under this section, means interest paid by the person as a sole owner, or as a joint tenant or tenant in common of the dwelling for the purposes of a home loan to---

 

(a)

the Government;

 

(b)

a financial institution;

 

(c)

a credit union registered under the Credit Unions Ordinance (Cap. 119);

 

(d)

a money lender licensed under the Money Lenders Ordinance (Cap. 163);

 

(e)

the Hong Kong Housing Society; or

 

(f)

any recognized organization or association;

 

"place of residence" (居住地方), in relation to a person who has more than one place of residence, means his principal place of residence;

 

"recognized organization or association" (認可*'織或協會) means any organization or association approved as such by the Commissioner under subsection (7).

26F. Nomination for purposes of section 26E

(1)

Where---

 

(a)

a deduction is allowable to a person under section 26E for any year of assessment; and

 

(b)

the person has no income, property or profits chargeable to tax under this Ordinance for that year of assessment,

 

the person may nominate his or her spouse, being a spouse not living apart from the person, to claim the deduction for that year of assessment.

(2)

Where a person has in accordance with subsection (1) made a nomination in respect of a deduction allowable to him under section 26E for any year of assessment---

 

(a)

(i)

the deduction shall cease to be allowable to that person; and

   

(ii)

the deduction shall be allowable to the spouse of that person; and

 

(b)

subject to subsection (4)(b), the person but not that spouse shall, for the purposes of section 26E(4)(c), be regarded as having been allowed the deduction under section 26E for that year of assessment.

(3)

Where a person has in accordance with subsection (1) made a nomination in respect of a deduction allowable to the person under section 26E for any year of assessment, and the deduction has been allowed to his or her spouse for that year of assessment, the Commissioner shall give written notification thereof to the person making the nomination.

(4)

(a)

A nomination made by a person under subsection (1) in respect of a deduction allowable to him under section 26E may only be revoked within 6 months after the date on which the Commissioner has given notification to the person in respect of the deduction in accordance with subsection (3).

 

(b)

Where a nomination is revoked under paragraph (a), the nomination shall be deemed not to have been made.

26G. Contributions to recognized retirement schemes

(1)

Subject to the other provisions of this section, where a person pays any contributions to a recognized retirement scheme during any year of assessment, a deduction in respect of the contributions shall be allowable to that person for that year of assessment.

(2)

A deduction shall not be allowable to a person under subsection (1) for any year of assessment---

 

(a)

in respect of any sum which is allowable as a deduction under Part IV;

 

(b)

in excess of the amount specified in Schedule 3B in relation to that year of assessment.

(3)

Subject to subsection (2), the amount of the deduction allowable under this section in respect of any contributions to a recognized retirement scheme, in relation to a person, shall be---

 

(a)

in the case of a recognized occupational retirement scheme---

   

(i)

the amount of the contributions paid by the person as an employee to the scheme; or

   

(ii)

the amount of the mandatory contributions that the person would have been required to pay as an employee if at all times whilst an employee during the year of assessment in question he had contributed as a participant in a mandatory provident fund scheme,

whichever is of the lesser amount;

 

(b)

in the case of a mandatory provident fund scheme, the amount of the mandatory contributions paid by the person as an employee.".

13. Basic allowance

Section 28(1)(b) is repealed.

14. Married person's allowance

Section 29(3)(b) is repealed.

15. Dependent parent allowance

Section 30 is amended---

(a) by repealing subsection (4)(b);

(b) by adding---

"(5) Where a deduction has been allowed to a person under section 26D for any year of assessment in respect of a parent or parent of his or her spouse, no person shall be granted a dependent parent allowance under this section for that year of assessment in respect of the same parent.".

16. Dependent grandparent allowance

Section 30A is amended---

(a) by repealing subsection (4)(b);

(b) by adding---

"(5) Where a deduction has been allowed to a person under section 26D for any year of assessment in respect of a grandparent or grandparent of his or her spouse, no person shall be granted a dependent grandparent allowance under this section for that year of assessment in respect of the same grandparent.".

17. Disabled dependant allowance

Section 31A(4)(b) and (c) is amended by adding "a deduction under section 26D or" after "granted".

18. Calculation of total income

Section 42 is amended---

(a) by repealing subsection (2)(a) and substituting---

"(a) such deductions as are under Part IVA allowable to the individual; and";

(b) by repealing subsections (3) and (4);

(c) in subsection (5), by repealing "subsection (2)(a)" and substituting "Part IVA".

19. Amount of provisional salaries tax

Section 63C(1)(ii) is amended---

(a) in subparagraph (A), by repealing "approved charitable donations provided for under section 12BA" and substituting "such deductions as are under Part IVA allowable to that person";

(b) in subparagraph (B), by repealing "approved charitable donations provided for under section 12BA" and substituting "such deductions as are under Part IVA allowable to them".

20. Rates

Schedule 2 is amended---

(a) in the subheading "For the year of assessment 1997/98 and each year after that year", by repealing "and each year after that year";

(b) by adding at the end---

"For the year of assessment 1998/99 and for each year after that year

Second ColumnThird Column
(a) Upon the first $35,000 2%".
(b) Upon the next $35,0007%".
(c) Upon the next $35,00012%".
(d) Upon the remainder17%".

21. Deduction for expenses of self-education

Schedule 3A is amended---

(a) in item 2, by repealing "and for each year after that year";

(b) by adding---

"3. For the year of assessment 1998/99 and for each year after that year$30,000".

22. Schedules added

The following are added---

"SCHEDULE 3B [ss. 16AA & 26G]
Deduction for the Purposes of
Section 16AA or 26G

1. For the year of assessment to be appointed under section 2(2) of the Inland Revenue (Amendment) Ordinance 1998 ( of 1998) and for each year after that year

$12,000

------------------------------

SCHEDULE 3C [s. 26D]
Elderly Residential Care Expenses Deduction



1. For the year of assessment 1998/99 and for each year after that year$60,000

SCHEDULE 3D [s. 26E]
Home Loan Interest Deduction

1. For the year of assessment 1998/99 and for each year after that year$100,000".

23. Allowances

Schedule 4 is amended---

(a) in the subheading "For the year of assessment 1997/98 and for each year after that year", by repealing "and for each year after that year";

(b) by adding at the end---

"For the year of assessment 1998/99
and for each year after that year

First Column
(section)
Second Column
(the prescribed amount or percentage)
1. Section 28 (basic allowance)$108,000
2. Section 29 (married person's allowance)$216,000

3. Section 30 (dependent parent allowance)---

(a) subsection (3)(a) $ 30,000
(b) subsection (3)(b) $ 30,000
(c) subsection (4)(a) $ 12,000
4. Section 30A (dependent grandparent allowance)---
(a) subsection (3)(a)$ 30,000
(b) subsection (3)(b)$ 30,000
(c) subsection (4)(a)$ 12,000
5. Section 30B(1) (dependent brother or dependent sister allowance)$ 30,000
6. Section 31 (child allowance)---
(a) subsection (1)(i) $30,000 for each of the first and second children
(ii) $15,000 for each subsequent child
(b) subsection (5)$165,000
7. Section 31A(1) (disabled dependant allowance) $ 60,000
8. Section 32(1) (single parent allowance) VALIGN=TOP>$108,000".

24. Transitional

For the purposes of calculating the net chargeable income under section 63C(1) of the Inland Revenue Ordinance (Cap. 112) in order to ascertain provisional salaries tax in respect of the year of assessment commencing on 1 April 1998, the references in section 12B(1)(b) and (2)(b) of that Ordinance to Part V of that Ordinance shall be read as if they were references to Part V of, and Schedule 4 to, that Ordinance as amended by this Ordinance.

Explanatory Memorandum

The purpose of this Bill is to amend the Inland Revenue Ordinance (Cap. 112) to give effect to the proposals in the 1998-99 Budget.

2. The Bill, inter alia, amends the provisions relating to salaries tax in the principal Ordinance---

(a) to introduce a new Part IVA which contains provisions for concessionary deductions applicable to Parts III and VII of the principal Ordinance (clause 12), and, in particular, provides for---

(i) deductions for approved charitable donations, which have before this amendment been dealt with in section 12BA in Part III and section 42(3) and (4) in Part VII of the principal Ordinance (proposed section 26C);

(ii) deductions for elderly residential care expenses, by which expenses in respect of parents and grandparents residing in any residential care homes will become deductible, subject to an annual maximum of $60,000 per parent or grandparent (proposed section 26D);

(iii) deductions for home loan interest, by which any interest payment made in respect of a home loan will become deductible for 5 years of assessment, subject to an annual maximum of $100,000 (proposed sections 26E and 26F);

(iv) deductions for contributions to a recognized retirement scheme will become deductible, subject to an annual maximum of $12,000 (proposed section 26G);

(b) to add an additional graduated scale of tax rates to Schedule 2 to the principal Ordinance so as to revise the marginal tax structure (clause 20);

(c) to increase the amount of the expenses of self-education deductible from assessable income under section 12 of the principal Ordinance (clause 21);

(d) to add an additional scale of tax allowances to Schedule 4 to the principal Ordinance so as to increase the respective amounts of the basic allowance, married person's allowance, dependent parent allowance, dependent grandparent allowance, dependent brother or dependent sister allowance, child allowance, disabled dependant allowance and single parent allowance granted under Part V of the principal Ordinance, and of various prescribed amounts under that Part (clause 23).

3. Clause 24 contains transitional provisions for the calculation of provisional salaries tax for the year of assessment commencing on 1 April 1998.