Sir Murray MacLehose
CONFIDENTIAL
21 February 1978
Taxation
4.
He believed that the time had come when an element of progressivity should be introduced into the tax system in Hong Kong. He believed that a system could be introduced whereby a man earning SHK100,000 a year could pay 15% as at present but that each extra HK100,000 or SHK150,000 in income could be subject to 1% more tax, up to a maximum of, say, 18%. He was convinced that this would not in any way reduce the attractiveness of Hong Kong as a venue for investment. When I asked him what he thought should be done with the extra money available, he said that he thought there was still quite a lot of room for improvement in the educational system by, e.g. greater subsidies for Form 4 or 5 students in independent schools and agreed with my suggestion that anything done to reduce the size of classes in primary and secondary schools would be a great benefit.
Land Prices
5.
In his view the greatest deterrent to large scale investment in Hong Kong at present was the high cost of land in the New Territories. He said that he knew of instances where the cost of the land was two or even three times the cost of building and development on that land. He felt that there was a case for greater Government intervention and for the introduction of some system such as the, skeleton factory system used here which would reduce the initial very great burden on those who wished to build factories.
6. We discussed at some length affairs in the Hong Kong Police, the effect of the Multi-Fibre Arrangement and general levels of dissatisfaction in the Public Service. He had nothing new to say on these. He also said that he felt that the time was now becoming quite close when some approach needed to be made to the PRC about the date of the lease, particularly as far as the granting of real property leases in Hong Kong and in the New Territories was concerned.
7. I am quite sure that most of the above will be old stuff to you and it is clear that he was riding several personal hobby horses. However, you might find it interesting to read the sort of influences that are brought to bear on us by many of our visitors from Họng Kong.
SC:
Mr Samuel (FED) Mr Murray (o.r.)
JA B Stewart
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CONFIDENTIAL