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10. The burden of Government taxation cannot be dismissed without some reference to its incidence and distribution over the various sections of the commu- nity. First principles shew that import duties would be suicidal in a Colony whose main livelihood is its entrepot trade. Customs dues on any scale are therefore out of the question except in respect of liquor, tobacco and petrol, which can be easily isolated and handled without too seriously obstructing the free movement of trade. Unfortunately, income tax is barred out also because of the difficulties of collection, and of obtaining correct returns. Thus the two most obvious, most flexible and perhaps most equitable sources of revenue are not available. The Treasury has con- sequently been compelled to concentrate on property taxes, either directly, in the form of crown rent and rates, or, indirectly, through water charges.
Very strong representations indeed were made to the Commission regarding the hardships to landlords of Chinese tenements involved in the latter charge. It might of course be argued that in times of financial emergency de minimis non curat lex and that property owners made fabulous profits in the past. It should not, however, be ignored that it has long been the practice of the Chinese community to invest their savings in house property. Depreciation of this capital which represents over half of the total wealth of the Colony has aggravated the existing trade depression by clogging the banks with frozen assets. The problem of water and the possibility of reforming the present methods of its administration has such serious financial repercussions on the Colony's internal economy that it will be further discussed in a separate chapter.
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11. If the Government of the Colony has in the main escaped criticism on the charge of over taxation, it has not secured so favourable a verdict in respect of the regulations it imposes on the industrial and trading community. Several witnesses remarked on the hardships these regulations impose, particularly on nascent and struggling industries. We realise the Government's difficulties in this issue which spring from the conflict of Western and Eastern conceptions of Governmental res- ponsibility. Regulations intended to safeguard the lives and health of the community must often seem arbitrary and fanciful alike to the worker and still more to the local employer who has to struggle with insufficient capital against competitors who are exempt from any such restrictions and who more often than not enjoy the further shelter of a protective tariff. It is impossible to make any concrete suggestions other than to urge against the premature adoption of social standards too much in advance of those current in the neighbouring territories and to stress the danger of regulating an industry out of existence. Regulations are apt to be passed lightly. and without due regard to their economic consequences on the Colony's competitive industries, by all Governments and particularly by a benevolent bureaucracy when an enthusiastic or idealistic departmental head promotes them.
The same
12. Reference has already been made to the partially municipal character of the Government and its significance in the field of public expenditure. dualism exists in the field of laws and regulations. One consequence of the present system, for which due allowance must be made, is the rather cumbrous method of promulgating, under the form of statutes, what should really be municipal by-laws. The result is an unnecessary and undesirable inflexibility. Amendments and revisions are not readily made when conditions alter, and enterprise is very apt to be faced by a complexity of laws and regulations whose interpretation gives unlimited scope for delay and even on occasions for obstruction.
13. The significance of currency as an element in the Colony's economics needs no stress, and we will confine ourselves to the statement that any over valuation of the local dollar is a defect of the absolute as well as relative soundness of the Colony's monetary system which is unavoidable in existing conditions in China. This premium though it scarcely affects the entrepot trade, handicaps local industry.
The Commissioners have every confidence that the enlightened control maintained over it in recent years will not be relaxed especially as there is a pos- sibility of a larger section than ever of China employing the Colony's notes as a medium in the present unsettled position of silver.
14. Undoubtedly the standard of living is higher in the Colony than in the adjoining Province. This, however, like the higher standard of currency, has the