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THIRD REPORT FROM THE EXPENDITURE COMMITTEE
PROCEEDINGS OF THE COMMITTEE
THURSDAY 11TH MARCH 1976
Sir Frederic Bennett
Mr. Bernard Conlan
Mr. Geoffrey Finsberg
Members present:
Colonel Sir Harwood Harrison
Mr. Frank Hooley
Mr. Anthony Kershaw
Mr. Arthur Lewis Mr. John Loveridge Mr. John Roper
Mr. Julius Silverman Mr. Nicholas Winterton
Report from the Defence and External Affairs Sub-Committee brought up and read.
Ordered, That the Report be read a second time paragraph by paragraph.
Paragraphs 1 to 3 read and agreed to.
Paragraph 4 read as follows:
"We welcome the satisfactory conclusion of the Defence Costs negotia- tions. We think it reasonable that the major part of the cost should be borne by the Colonial administration since the major military role for British forces in Hong Kong and indeed the only role for which they will now be properly equipped is internal security where they provide essential backing for the local police. On the other hand we could not justify the continued retention of important sites centrally situated which remain from days when the Services were present in much greater numbers and had wider responsibilities. We were concerned that in the negotiations the Governor of Hong Kong might have had difficulty in carrying with him the unofficial members of the Executive and Legislative Councils with whom the Minister of State did not negotiate directly. Our Sub-Committee in Hong Kong found no evidence to support the suggestion that the negotia- tions had been anything but hard and we do not underestimate the problems which the Governor was facing in gaining popular acceptance for the agreement in Hong Kong (Q. 8). We regard the result as fair to all concerned and congratulate the Minister of State and the Governor on their conduct of the negotiations."
An Amendment proposed in line 1, to leave out from "We" to end of para- graph and add :
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cannot regard the Agreement as satisfactory in the light of the immense corporate and private wealth in the Colony and the inadequate arrange- ments for taxing that wealth. The maximum rate of tax on salaries is 15 per cent. Dividends are not taxed and there is no capital gains tax. From April 1966 to April 1975 the standard rate of taxation on corporate profits was 15 per cent. ; it has since been raised to 16 per cent. These tax levels are amongst the lowest in Asia and are even more attractive because opera- tions carried on outside Hong Kong are not subject to Hong Kong taxes even if controlled from Hong Kong and not taxed in any other country. The Economist (19th July 1975) believes it 'quite possible that the admini- stration loses HK$100 million a year because shipping charters are deliber-