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WEDNESDAY, AUGUST 14, 1974
MR. HADDON-CAVE SAID THAT QUITE APART FROM THE VERY DOUBTFUL CASE FOR THE ABOLITION OF INTEREST WITHHOLDING TAX, THERE WERE AT LEAST TWO ARQULENTS AGAINST ADOLITION.
IN THE FIRST PLACE, HE SAID, THE RELIEF GIVEN WOULD EFFECTIVELY WIND UP WITH THE FINANCIAL SECTOR AND THE WEALTHIER GROUPS IN OUR SOCIETY AND THIS COULD DE INEQUITABLE.
SECONDLY, THE POSSIBILITY COULD ARISE OF NON-RESIDENTS SWITCHING HIGHLY VOLATILE SPECULATIVE FUNDS INTO LONG KONG DOLLARS WHEN THEY DECIDED TO TAKE A PARTICULAR VIEU OF RELATIVE EXCHANGE RISKS AND THEN SUITCHING THEM OUT AGAIN WHEN THAT VIEW CHANCED.
HE POINTED OUT THAT THE CONSEQUENCES FOR THE MONEY SUPPLY AND THE EXCHANCE VALUE OF THE HONG KONG DOLLAR WOULD THEN BE OBVIOUS AND THAT IT WOULD BE IRRESPOUSICLE TO OVERLOOK THE DAMPENING EFFECT ON DESTABILISING INWARD FLOUS OF THE WITHHOLDING TAX.
REFERRING TO THE SUGGESTION THAT NON-RESIDENTS SHOULD BE EXEMPTED FROM THE PAYMENT OF THE INTEREST WITOLDING TAX, MR. HADDON-CAVE SAID THAT THIS WOULD PRESENT ENORMOUS ADMINISTRATIVE DIFFICULTIES COTH FOR THE BANKS AND FOR THE INLAND REVENUE DEPARTMENT, WHICH ONLY THE EXISTENCE OF EXCHANGE CONTROLS COULD OVERCONE.
+ IN ANY CASE,+ HE SAID, +1 WOULD NOT BE KEEN TO ENCOURAGE VOLATILE INFLOUS OF SPECULATIVE OVERSEAS FUNDS.+
THE FINANCIAL SECRETARY WAS ALSO AGAINST THE IDEA OF ABOLISHING THE TAX FOR DEPOSITS WITH LICENSED BANKS IN VIEW OF THE DAMAGE IT COULD CAUSE TO HONG KONG'S DEVELOPING KOKEY MARKET.
HE ALSO REFERRED TO ANOTHER SUGGESTION FOR PARTIAL ABOLITION WHICH HE HIDSELF AD FLOATED IN LAST YEAR'S BUDGET SPEECH. THIS UAS THE EXEMPTION OF CERTAIN FOREIGN CURRENCY DEPOSITS, WHICH HE NOTED, COULD SIPLY GIVE THE BUSINESS TO LOCAL BANKS AND FINANCE HOUSES INSTEAD OF OVERSEAS INSTITUTIONS,
+THIS IS A WORTHY MOTIVE,+ HE SAID, +BUT ALL THE INDICATIONS I HAVE ARE THAT THEE NURDER OF BANKS WHICH COULD BE PREPARED TO PAY THE PRICE, IN THE FORM OF PROFITS TAX ON THEIR +TURIH IS VERY SMALL.
+THE HAJORITY OF BANKS AND FINANCE HOUSES, WHILE EAGER FOR THE PRESTIGE OF A LICENCE FOR A SPECIAL DEPARTMENT TO BORROW AND LEND FOREIGN CURRENCIES AND DE EXEIPT FROM THE OBLIGATION TO WITHHOLD TAX ON INTEREST PAID ON DEPOSITS, WOULD IN PRACTICE CONTINE TO ACT SIMPLY AS INTERNED HATIES IN THE PLACING OF SUCH BUSINESS IN OTHER CENTRES CIERE IT ATTRACTS NEITHER INTEREST TAX NOR PROFITS TAX.+
HE THEREFORE CONCLUDED THAT UNTIL HE WAS SATISFIED THAT A VERY SUDSTANTIAL FLOU OF INCONE ASSESSACLE TO PROFITS TAX WOULD DE CENERATED, HE COULD NOT THINK THAT THE SETTING UP OF THE NECESSARY MACHINERY FOR THESE SPECIAL DEPARTIENTS WOULD BE JUSTIFIED.
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