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HONG KONG, March 10, 2021 /PRNewswire/ -- As Hong Kong taxpayers enter the tax-return season, new Manulife research suggests gaps in tax knowledge that could result in many missing out on the tax savings potential and benefits of tax-deductible solutions.
Wilton Kee, Chief Product Officer and Head of Health at Manulife Hong Kong, said Hongkongers are generally good at leveraging tax-deductible items to ease their tax burden. However, public awareness and knowledge about the three tax-deductible products still sees room for enhancement.
In a survey of 1,001 Hong Kong taxpayers about their knowledge of local tax rules, including the various allowances and deductibles they can claim, respondents scored only an average of three out of ten questions correctly. Conducted in late January, the survey comprises ten questions, with six related to the trio of tax-deductible solutions first launched in 2019, namely the Voluntary Health Insurance Scheme (VHIS), Tax Deductible Voluntary Contributions (TVC) and Qualifying Deferred Annuity Policies (QDAP).
The findings suggest that respondents have downplayed the benefits of the three tax-deductible solutions, scoring an average of 1.4 out of 6 questions related to them.
"According to our survey, when filing their tax returns Hongkongers are good at leveraging long-existing tax-deductible items such as dependents, charitable donations and home loan interest, with more than three quarters (76%) including these deductibles - typically two - in their submissions," said Wilton Kee, Chief Product Officer and Head of Health at Manulife Hong Kong. "While many are familiar with VHIS, TVC and QDAP and over a third (38%) have applied for deductions using these products, most respondents (68%) don't know they can save more by claiming deduction for more than one VHIS policy, compared to 32% who know."
Gaps in tax knowledge
When asked what products are qualified for tax deduction, only a quarter of the respondents (27%) correctly picked VHIS, TVC and QDAP. Some respondents wrongly thought that critical illness (13%) and savings products (17%) could also be used to reduce taxes.
Only 27% of respondents were aware that the maximum tax-deductible amount for VHIS is HK$8,000 per insured person, similar to the 31% who knew the combined maximum for QDAP and TVC is HK$60,000. Also, only 25% of the respondents were clearly aware that the maximum tax savings for QDAP and TVC is HK$10,200, while 75% of the respondents were not sure how much they could save if they invested HK$60,000 into both or either of TVC and QDAP.
Tax-deductible solutions aside, the respondents were more familiar with broader tax matters, getting almost 50% of their answers right (1.9 out of 4). Yet, when asked about the maximum tax-deductible mandatory contributions to an MPF scheme per year, only 32% of the respondents knew that it is HK$18,000, with the remaining 68% either saying they didn't know or selecting the wrong answers.
Around 60% knew that eligible personal allowances for salaries tax include those for children, parents, grandparents and dependent siblings. Also, about 60% correctly said that home loan interest, expenses on self-education and approved charitable donations are eligible for tax deductions.
Older people, high taxpayers generally more knowledgeable
Respondents whose 2020-21 salaries tax payable was HK$50,000 or higher had the highest average score on all questions, answering around five questions correctly, while 26% of this group scored more than six questions correctly.
As the survey was conducted online, more than half of the respondents said they have used eTAX to file tax returns and two-thirds have used online tax calculators to estimate their salaries tax. Digital usage is higher amongst those aged below 50.
When filing their tax returns, 64% of those surveyed said they used the same set of allowance and deduction items as in previous years, compared to 69% who said they would discuss with others on how to maximize the allowance and deduction items for better tax-savings. Nearly two-fifths (39%) of respondents said they just paid the stated amount, while 61% said they checked the assessment to make sure the calculations were done correctly.
"In general, people who scored higher were typically older and paid more taxes. Also, people who have included QDAP, VHIS or TVC in the deduction tended to achieve higher scores, indicating that they are more tax conscious and understand how to maximize tax savings via deductions and financial products," Mr. Kee added. "If taxpayers can learn more about tax-deductible products and tools, they'll be in a better position to maximize tax savings."
About Manulife Hong Kong
Manulife Hong Kong, through Manulife International Holdings Limited, owns Manulife (International) Limited, Manulife Investment Management (Hong Kong) Limited and Manulife Provident Funds Trust Company Limited. As a member of the Manulife group of companies, Manulife Hong Kong offers a diverse range of protection and wealth products and services to individual and corporate customers in Hong Kong and Macau.
About Manulife
Manulife Financial Corporation is a leading international financial services group that helps people make their decisions easier and lives better. With our global headquarters in Toronto, Canada, we operate as Manulife across our offices in Canada, Asia, and Europe, and primarily as John Hancock in the United States. We provide financial advice, insurance, and wealth and asset management solutions for individuals, groups and institutions. At the end of 2020, we had more than 37,000 employees, over 118,000 agents, and thousands of distribution partners, serving over 30 million customers. As of December 31, 2020, we had C$1.3 trillion (HK$7.9 trillion) in assets under management and administration, and in the previous 12 months we made C$31.6 billion in payments to our customers. Our principal operations are in Asia, Canada and the United States where we have served customers for more than 155 years. We trade as 'MFC' on the Toronto, New York, and the Philippine stock exchanges and under '945' in Hong Kong.