Controversial legislation proposing the abolition of tax deductions on company cars has been rejected by a Legislative Council committee. Legco's Bills Committee almost unanimously rejected the proposed legislation at a meeting late last month - leaving plans to eliminate corporate car deductions in grave doubt. The outcome is a victory for the business community, which has consistently opposed the bill since it was first proposed late last year. Industry experts say the Inland Revenue (Amendment) (No 4) Bill 1995 would have cost companies tens and possibly hundreds of millions of dollars in tax deductions. In its proposed form, the legislation would have affected not only cars provided by companies for private use by employees, but any other cars used by companies in their day-to-day operations. The move was aimed, in part, at ending traffic problems. A clause in the bill stated it was 'one of the measures proposed to address traffic congestion'. Companies now are entitled to deductions for more than 70 per cent of the cost of buying a car in the first year, and ultimately the car's full value once depreciation is accounted for. Most affected would have been utility companies and other groups that operate large fleets of company cars for business and private use. Fleet maintenance and car rental groups would have been hit, as well as makers and sellers of luxury cars. The bill proposed that the deduction of expenses for the purchase, financing, leasing, maintenance, operation and use of cars from the employer's tax liability was to stop. The Bills Committee - which has representatives from across the political spectrum - found little to like about the legislation, proposed by former transport secretary Haider Barma. Not one member of the committee voted in favour of the bill. One member at the Bills Committee meeting, Eric Li Ka-cheung, an accountants representative in Legco, yesterday said the decision had put paid to a 'blatant attempt at social engineering' by the Government. 'Using revenue means to affect social behaviour was both unjust and unfair,' he said. Lloyd Deverall, a senior tax partner at accounting firm KPMG Peat Marwick, said the bill was an inefficient way of dealing with congestion. 'If the Government wishes to deal with traffic congestion, there must be far more direct and targeted measures of so doing,' he said. 'It is fair to say the proposed legislation was draconian and retrospective. It was also inequitable in that its impact would not only disallow deductions to end users, but also to financial intermediaries involved in providing certain types of finance to end users.' The legislation was 'totally inconsistent with the simple tax system which Hong Kong prides itself on maintaining', he said. Mr Li said any further moves on removing deductions would be in the hands of the new Secretary for Transport, Gordon Siu Kwing-chue.