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21
WEDNESDAY, AUGUST 14, 1974
WITHHOLDING TAX ISSUE RAISED IN COUNCIL
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THE FINANCIAL SECRETARY, MR. PHILIP HADDON-CAVE SAID TODAY THAT THE ABOLITION OF THE WITHHOLDING TAX WOULD RESULT IN A CONSIDERABLE LOSS OF REVENUE WHICH WOULD HAVE TO BE MADE GOOD BY HIGHER RATES OF OTHER TAXES OR SOME OTHER LEVY.
VED
N-521
| 22 AUG1974
HE STRESSED THAT ALTHOUGH GOVERNMENT WAS PERFECTLY WILLING TO RECONSIDER THE ABOLITION OR PARTIAL ABOLITION OF INTEREST TAX, HE WAS SURE THAT IN THE ADSENCE OF FRESH ARGUMENTATIONS GOVERNMENT'S CONCLUSION ON THIS ISSUE WOULD NOT DIFFER FROM THOSE IN THIS YEAR'S BUDGET SPEECH.
THE FINANCIAL SECRETARY WAS REPLY ING TO A QUESTION RAISED AT THE LEGISLATIVE COUNCIL BY THE HON. ROCER LOCO WHO ASKED IF THE GOVERNMENT COULD RE-CONSIDER THE ABOLITION OF INTEREST TAX.
MR. HADDON-CAVE SAID HE SAW NO REASON WHY INCOME IN THE FORM OF INTEREST SHOULD BE TREATED KORE GENEROUSLY THAN THE THREE OTHER FORMS OF INCONE WHICH WERE SUBJECT TO TAX UNDER THE INLAND REVENUE ORDINANCE.
HE POINTED OUT THAT ABOLITION OF INTEREST TAX WOULD LEAD TO A LOSS IN GOVERNMENT REVENUE WHICH, IN 1973-74 AMOUNTED TO $75 MILLION. RECEIPTS FROM INTEREST IN 1974-75 WERE NOW EXPECTED TO BE IN THE REGION OF $100 MILLION.
+ IF THE GOVERNMENT ACCEPTED A CASE FOR THE ABOLITION OF INTEREST WITHHOLDING TAX, THEN IT WOULD HAVE TO FOLLOW, 1 THINK, THAT INTEREST EARNINGS CAUGHT UP IN PROFITS TAX ASSESSMENTS WOULD ALSO NEED TO BE EXEMPTED FROM PROFITS TAX,+ MR. HADDON-CAVE SAID.
THE LOSS IN REVENUE WOULD ALSO BE AGGRAVATED BY COMPANIES MOVING INCREASINGLY TO LOAN FINANCE, AND ALL SORTS OF SCHEMES WOULD DE HATCHED UP TO CONVERT VARIOUS FORMS OF INCOME INTO, OR DISGUISE THEM AS, INTEREST EARNINGS.
HKK $/201
+IT IS QUITE INCONCEIVABLE THAT REVENUE LOSSES OF THIS ORDER COULD BE HADE GOOD BY INCREASED PROFITS TAX ON THE BORROWING 03 LENDING TRANSACTIONS THAT WOULD BE CENERATED BY THE ACOLITION OF INTEREST TAX. SO, THE LOSS OF REVENUE COULD HAVE TO BE MADE. GOOD BY HIGHER RATES OF OTHER TAXES OR SOME OTHER LEVY.+ HE SAID.
TURNING TO THE MONETARY ASPECTS, THE FINANCIAL SECRETARY SAID THAT HE WAS WELL AWARE OF THE ARGUMENT THAT THE WITHHOLDING OF INTEREST TAX FROM PAYMENTS OF INTEREST DY DANKS CAND FINANCE HOUSES) HAD THE EFFECT OF ENCOURAGING COMPANIES AND INDIVIDUALS RESIDENT IN HONG KONG TO TRANSFER AT LEAST PART OF THEIR EXCESS LIQUIDITY ABROAD, WITH ERODING EFFECTS ON THE HONG KONG DOLLAR DEPOSIT BASE OF THE LICENSED BANS AND THUS ON THEIR ABILITY TO FINANCE HONG KONG'S INDUSTRY AND COMMERCE.
/MR.HADDON.CAVE