The Government's Response
to the Issue on Tax-exempted Items of Motor Vehicles
The Panel has expressed concern about exempted accessories under the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330). In consideration of the need for and the rising popularity of hands-free mobile phone, the Panel is of the view that exfactory products of this type should be included in the list of exempted items under Cap. 330.
At present, the values of three types of accessories, i.e. air conditioners, audio systems and anti-theft systems, are exempt from first registration tax (FRT). FRT exemption to accessories of motor vehicles is not granted on the basis of whether such accessories are necessities or luxuries. The rationale for providing the exemption to such accessories is a historical one. Before August 1994, FRT was levied based on the Cost-Insurance-Freight values of motor vehicles. At that time, the three accessories were commonly found as locally-fitted items and hence their values were not taxed. To preserve the position prevailing at the time before we changed the basis for assessing the FRT, the Administration has provided exemption to the three accessories under the current FRT system which has been in place since August 1994. The Administration notes that there have been changes in the trade practices and that nowadays the three tax-exempt accessories are commonly found as in-built items. The Administration is reviewing whether the arguments for exempting such items are still valid.