Tax time

In Hong Kong, January is the month when you have to pay your tax bill. I am getting used to this, but at first it was quite a shock after having tax deducted automatically from my salary under the British PAYE system. Instead, it is common to receive a "13th month" of salary in December or January, which (for most people) covers the tax bill, but obviously not all of it for everyone. It's a strange system, and although some people regard it as a bonus, in effect the employer is holding back part of your salary and paying it to you at the end of the year. Legally you are entitled to receive the appropriate proportion of this if the employer terminates your employment, though you lose it if you resign. Plus, over the last few years, some companies have stopped paying the 13th month salary, but of course the tax bills still have to be paid.

The banks think they can help solve this problem for you. I've got used to receiving offers for 'tax loans', but this year the credit card companies seem keen to give people an incentive to paying tax bills using their card. Presumably they hope that some customers will take a few months to pay off the money, and end up paying interest at 24% per annum or whatever it is they charge.

Last year I was slightly surprised to discover that I could pay my bill through my bank's internet site and charge it to my credit card (so delaying payment and earning me a few measly bonus points). I wondered whether I had been a bit clever and discovered something that the bank had not really intended me to do, but this year they are advertising that this service is available, so obviously they wanted me to do it.

Another credit card company has written to me, suggesting that I can use their card to pay my tax bill. If I then spend a certain amount on the card in February and March they will give me 'cashback' (0.5%) in about a year's time. Too complicated, I fear.

I have also received a leaflet from HSBC credit cards advising me that they are running another scheme to try to encourage customers to spend more money. However, they seem to be rather confused about the meaning of the words 'at least' and 'maximum'. If you read the small print, you discover that you can get a maximum of 10 gifts, but they also say: "so you will get at least HK$200 in cash coupons". Not really - only if you make 10 purchases of HK$500 or more and phone their special 24-hour hotline (and enter a mass of detail) 10 times. The headline says "get up to HK$200 or more", which is wonderfully vague but closer to the truth. What they really mean is that you are unlikely to get more than HK$200.

Life has certainly changed for credit and charge card companies. Six or seven years ago it was unusual to get even the first year fee waived, but now there are offers of multiple years of automatic fee waivers, and many cards waive the fee if you spend a certain amount during the year. On top of that, many customers threaten to cancel the card if they have to pay an annual fee, and the banks usually agree to waive the charge when asked.

Nevertheless, I was surprised to receive a letter from one charge card that I use only rarely, telling me that as a valued customer my fee for the coming year had been waived. I only wanted the card because of the airport lounge access they offer, and I was quite willing to pay the annual fee, so that was an unexpected bonus (after my initial two years free). One of my cards is free because I spend over the minimum amount, another because we have a mortgage with the bank concerned, and another because the initial fee waiver lasts for five years! So, I am not currently paying for any of my cards.

This can't last for ever, and once the economy picks up I expect that the banks will quietly withdraw these concessions and we will have to start paying for our credit cards again. Not just yet, though.

Original post