The much-criticised duty, which draws $1.5b a year, is unlikely to be axed without a healthy surplus, says one expert Growing public demand for the abolition of estate duty - which is levied on a person's assets at the time of death - are expected to be resisted by the government for the time being. A government source said the revenue from the tax of about $1.5 billion a year remained important and the duty would be retained, despite expectations that Financial Secretary Henry Tang Ying-yen might scrap it in his budget speech on March 16. About 100 submissions on the tax have been made so far, with most trade associations and professional bodies in favour of its elimination. 'My understanding is that there is great demand for the abolition of estate duty. But we might still see a budget deficit going forward, so the government may want to be prudent,' said PricewaterhouseCoopers tax partner Tim Lui Tim-leung. He added that reducing or removing estate duty, which is often perceived by the public as a 'rich man's tax', would lead to demands for similar action to be taken on salaries tax, something the government was unlikely to agree to, at least for now. 'Doing away with estate duty would be a different story if the government had a healthy surplus,' Mr Lui said. The argument against estate duty largely rests on the relatively marginal impact such a move would have on the government's finances. Of the 15,654 cases dealt with in 2003-2004, only 258, or 1.65 per cent, were required to pay the tax. 'Occasionally, there may be one or two large estates that pay, but this is rare,' Mr Lui added. 'But estate duty may also be seen as an opportunity for the government to conduct tax audits with the aim of building a case for investigation.' Estates in Hong Kong worth more than $10.5 million are taxed at 15 per cent, which opponents claim stifles the investment climate, and encourages both foreign investors and residents to put their assets elsewhere. Hong Kong's estate duty is relatively low compared to the US and Britain, but is more than Singapore, which charges 5 per cent on the first S$12 million ($57.5 million) and 10 per cent thereafter. Estate duty is levied on assets based in Hong Kong, including property, bank accounts and equity. Exempting accounts and equity from the duty would allay foreign investors' concerns, Mr Lui said, and would cost the government only $550 million, which is 'not too big a giveaway'. The flipside of the argument is that removing the duty may adversely affect those employed in the tax advisory and trust industry. However, City University of Hong Kong associate professor of economics and finance Li Kui-wai said that if lowering or abolishing estate duties resulted in an influx of foreign capital, the investment community would also benefit.