Another 45,000 wage earners will be scooped into the tax net in the coming financial year, when the tax-free earnings allowance falls by $4,000. The cut is the second phase of the adjustment in salaries tax proposed in former financial secretary Antony Leung Kam-chung's budget last year. He recommended restoring tax bands and marginal tax rates to pre-handover levels in two equal phases. The adjustment for the coming financial year will see the basic tax allowance - the amount of earnings on which no tax is levied - drop from $104,000 this financial year to $100,000. The married persons' tax allowance will be cut by $8,000, to $200,000. The single parent allowance will also be reduced from $104,000 this year to $100,000 in 2004-05. The tax rate for top income earners will rise by half of one per cent, to 16 per cent. Tax bands will narrow from $32,500 this year to $30,000. Tax will be levied at a rate of 2 per cent on the first $30,000, 8 per cent on the next, 14 per cent on the next and 20 per cent on the rest of their income. Cutting the basic allowance will increase the number of salaries-tax payers to 1.29 million.
