AS JULY 1, 1997, draws closer, there are clearly some frazzled nerves in the corporate sector about the implications of that date - especially on tax. Not only do many large companies have a tax fraud hit squad to worry about, concern about their future tax liabilities must also haunt them. This week, a senior Hong Kong tax specialist, Michael Olesnicky, went public to urge China to call on the mainland's State Administration of Tax to make its post-1997 policy in the area clear. He is not alone. A group of Coopers & Lybrand's international tax partners will be in the territory next week - and a discussion on how tax will in future be levied is high on their agenda. The urgency with which tax firms are regarding next year stems from some knee-jerk reactions by companies - multinationals in particular - to dispose of assets in the territory. They are increasingly worried that despite the 'one country, two systems' policy, China has not properly reassured companies - or individuals - about how they will in future be taxed. For instance, there is concern that Hong Kong-established companies will no longer be entitled to the tax concessions they have on the mainland. They are now regarded as foreigners, and as such, are entitled to substantial tax concessions in many cases. Beyond the handover, however, they will no longer be foreign - even though they will be part of a separate administrative region. This, according to Mr Olesnicky, appears to raise a clear obligation on the part of the Chinese State Administration of Tax to put the corporate community's fears at ease. Mr Olesnicky, a senior figure at law firm Baker & McKenzie, says the administration has one option if it wants to put the collective corporate fears at ease - to make official pronouncements to ease the community's fears as soon as possible. Another question in the tax and corporate community concerns the future independence of the Hong Kong Inland Revenue Department. Again, there is significant concern, this time over whether the department will be forced to release confidential information to the Chinese State Administration. No official pronouncement has been made about this issue - a factor Mr Olesnicky once again sees as an oversight that is unnecessarily putting a dampener on taxpayer confidence. There is also a growing belief that many Hong Kong manufacturers with operations in China will be forced to pay tax in both jurisdictions after the handover. Tax authorities on the mainland have become increasingly sophisticated and have been taking a tough line on cross-border transactions. Until recently, China had taken a relatively benign view regarding the taxation of Hong Kong companies operating on the mainland. But according to Yvonne Law, tax partner with Deloitte Touche Tohmatsu, many Hong Kong companies are channelling growing numbers of staff into sub-contracting arrangements which are now raising the ire of Chinese authorities. Companies with manufacturing operations in China, but sales operations in Hong Kong, have perhaps most to fear from a possible new tough line from mainland authorities. It all adds up to an increasingly anxious band of Hong Kong-based companies, that are sure to prod their accountants over the next few months to make sure they have a safe, tax-free passage through the handover.