In a written reply, the Secretary for Financial Services and the Treasury has clarified the tax status of an employee's contributions to a Mandatory Provident Fund Scheme or any Recognized Occupational Retirement Schemes. Employee's may claim a tax deduction for such contributions but employers are required to report their employee's total income, leading to claims from some employees that they have paid more tax than they should.

To apply for the deduction, employees should declare in Part 4.3 of their individual tax returns the actual amount of mandatory contributions to recognised retirement schemes. Upon verification, the Inland Revenue Department will have the actual contributions deducted from the assessable income in their tax assessments.

In the 2002-03 year of assessment, such deductions were allowed in 99.8% of all claims. Taxpayers who are aggrieved by their tax assessments may raise objections to the Commissioner of Inland Revenue under the Inland Revenue Ordinance. In general, deductions are not allowed if taxpayers have failed to substantiate the actual amount of contributions made.

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