Because of the good performance of the economy in 1995, an across-the-board one-off tax rebate of 10 per cent on individual income tax will be granted in Year of Assessment 1996. Revenue loss to the Government is estimated at $250 million.

There are 14 tax brackets in the present personal income tax schedule. To simplify the tax system, I propose to reduce the number of brackets from 14 to 10. At the same time, to further encourage hard work and to reward talent and enterprise, the top marginal income tax rate will be lowered from 30 per cent to 28 per cent, with appropriate reductions in the other rates.The new brackets and rates are shown at Annex III.

The new structure of tax brackets has been designed especially to lighten the tax burden of the middle income group, with chargeable incomes between $25,000 and $100,000. Many such families pay substantial amounts of car-related taxes or foreign workers levy, if they own a car or employ a maid. The changes will take effect from Year of Assessment 1997. Revenue loss is estimated to be $375 million.