PROPERTY TAX (AMENDMENT) BILL

Order for Second Reading read. 4.20 pm

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Property Tax (Amendment) Bill, 1986, gives legislative effect to two property tax changes announced in the 1986 Budget Statement. The two changes involve the property tax assessment on hotel rooms, restaurants and function rooms to be based on gross receipts and the waiver of property tax for lands under development.

Opportunity is also taken to include two other amendments, introduced under clauses 6 and 7, to improve property tax administration and procedures.

Hotel owners had requested for property tax assessments to reflect more clearly and quickly the gross receipts and occupancy rate of each hotel. Hotel assessments have hitherto been determined after periodic study of the hotel industry-wide indices. The annual value of each hotel is then assessed adjusting for differences in location, class and attractiveness. The criticism is that the time taken to gather data, study and compile the averages and then adjust for the individual differences of each hotel takes too long.

It is proposed to assess the annual value of a hotel at a percentage of the annual gross receipts. The annual value and therefore the tax payable will then be responding very quickly to the business pulse of each hotel. The gross receipt instead of the net receipt is chosen because property tax is a tax on property and not a tax on net profits. Even if a hotel is making a loss it still has to pay property tax to contribute towards the public services and public goods it consumes.

The amendment in clause 2 thus serves principally to empower the Chief Assessor to assess the annual value of specified categories of properties with reference to gross receipts under this new proviso (g) to the "annual value" definition in section 2.

Mr Deputy Speaker, Sir, I have also announced in the 1986 Budget Statement that from 1st July 1986, vacant lands under private development shall be exempt from property tax. Under current law, exemptions may be given to houses of worship, public schools, charitable institutions and certain social institutions. Tax may also be remitted on grounds of poverty, equity or justice.

The amendment introduced in clause 3 will allow the Minister for Finance to make orders granting tax exemptions, remission or concessions for certain categories of properties such as vacant lands under private development. Property tax exemptions or remissions will then be used as fiscal tools to assist any sector of the economy.

Clause 3 will also be used to grant concessions for owners who carry out large scale renovations to their properties. It is hoped that such major activities will assist the construction industry.

Clause 4 introduces a new section 6A which will empower the Minister for Finance by order to require the annual value of properties specified in the order to be valued on the basis of gross receipts. To boost the tourist industry, approved tourist projects will be assessed by this method. The Minister may also order how the annual value is to be computed. This clause is connected to clause 2 above.

The amendment in clause 5 is to empower the Chief Assessor to raise or lower the annual value when the gross receipts rise or fall. This will also enable the Chief Assessor to deem a change in the gross receipts of the business as evidence that the existing annual value is no longer accurate. This clause is a consequence of clause 2.

I now move to the two other amendments aimed at the improvement of property tax administration and procedures. The amendment to section 20 will enlarge the composition of the Valuation Review Board from six to nine members and a Chairman. Since 1960, the Board has six members and a Chairman. With the great increase in the number of properties assessed since 1960, it is necessary to enlarge the Board to nine members and a Chairman so that appeals may be heard more expeditiously.

The amendment to section 46 extends the prohibition on unauthorized allotment or fixing of house numbers. This is because the existing law does not cover individual units in a shopping complex or condominium.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau].

Bill considered in Committee.

[Mr Deputy Speaker in the Chair]

Clause 1 -

The Chairman: The citation year will be changed to "1987".

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 7 inclusive ordered to stand part of the Bill.

Bill reported without amendment; read a Third time and passed.

Mr Deputy Speaker: Order. Moment of interruption.