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4. It was suggested to me by more than one person later on in my visit that the existing low level of taxation is not so crucial to decisions about investment in Hong Kong as the Government is inclined to argue. This view was put to me with particular force by a young ex-patriate lawyer, Mr Tisdale, who used to work for the 'Hong Kong Standard" and is now, among other things, a member of
the Board of Education which advises the Director of Education on major policy issues in the educational field. His thesis, which he said had been built up on the strength of talking to a good many foreign investors, was that there were more important reasons than the level of taxation as to why investors put money into Hong Kong. These included the lack of "bureaucratic interference" in business (see Mr Haddon-Cave's remark above), Hong Kong's good communications and banking and commercial facilities, the absence of labour problems (comparatively high wages but no strikes), Hong Kong's free port status, which facilitated the flow of imports and exports and, somewhat surprisingly, political stability. On this last point, Mr Tisdale argued that Hong Kong has been much less unstable over the years than a good many other places in the region. Of course, he said there was bng term uncertainty about Hong Kong's future but since the Chinese had made it clear that they were content with the status quo that was sufficient for investors not to be detered on political grounds from putting their money into Hong Kong. Compared to some of the other factors, Mr Tisdale considered and I heard others express the same view that the low level of taxation in Hong Kong was not vital to investment decisions. He pointed out, for example, that on the taxation argument the advantage would lie with, for example, Taiwan, South Korea and the Philippines which offered tax incentives, if not tax havens, to foreign investors. It would be rash to conclude that Mr Tisdale's thesis is correct but others who see Mr Haddon-Cave may wish to explore it with him.
4 August 1976
S
D.F. Mitti
D F Milton
Hong Kong Department
сору:
Mr Smith
SENIOR ECONOMIC ADVISER
G72/G
Mr Duffy/Mr Janvrin
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