Bigger tax breaks on the cards for MPF contributorsTop News | Jane Cheung 7 Dec 2018
Tax deductions for people who choose to invest more than the minimum sums required for MPF schemes should be raised to HK$60,000 from HK$36,000, the administration suggests.
That would encourage people to save more for retirement, the Financial Services and Treasury Bureau stated in a document sent to legislators yesterday.
Assuming that a single taxpayer earns a monthly salary of HK$60,000 and is taxed at the standard tax rate of 15 percent, the person would be able to claim deductions of HK$10,200 a year under the revised limit of HK$60,000.
That would be 67 percent more than the HK56,120 per year under the existing limit of HK$36,000.
But people who earn between HK$15,000 and HK$30,000 would not benefit as they would not be eligible for the highest deduction.
An amendment bill on a revision is expected to be introduced next year at the earliest after being gazetted today.
But a first reading and debate on the second reading will commence at next Wednesday's Legislative Council meeting. The bureau said the Mandatory Provident Fund Schemes Authority has been encouraging scheme members to make voluntary contributions to better prepare for their retirement.
Last year, the authority received HK$68.99 billion in Mandatory Provident Fund contributions, and HK$3.46 billion were voluntary payments.
The bureau also said in the last financial year that annual revenue lost from tax deductions from mandatory contributions and occupational retirement schemes was about HK$1.25 billion.
But it noted there are differences between voluntary contributions and tax-deductible voluntary contributions.
"The new tax deductions would provide flexible incentives for taxpayers to take out qualified deferred annuities or make tax deductible contributions - or do both according to a person's own risk appetite and post-retirement financial needs," the bureau said.
"It will also help raise public awareness of the need to make voluntary personal savings early for retirement."
In terms of sustainability, the bureau said the proposal would encourage retirement savings and promote the concept of managing post-retirement financial resources carefully as people live longer these days.
While an amendment would benefit both sexes, the bureau added, it might have a more pronounced effect on women.
That is because the proposal extends the deduction to cover a taxpayer's non-working spouse. Also, women have a longer life expectancy than men.