10. Opposition to a full income tax is based mainly on apprehensions as to
(a) Difficulties of administration, including:-
(i) the possibility of evasion and avoidance and consequent inequitable
incidence,
C
(ii) the resentment of inquisitorial" investigation into details of
partnerships and personal and family affairs,
(in) the cost of establishing a large new Government department (and consequential additions in salaries and pensions) to collect the tax and the impossibility of obtaining, during the present emergency, expert assistance for that purpose.
(b) Effects on the Colony, e.g., flight of capital and discouragement of
the influx of new capital.
11. In framing the War Revenue Bill it has been our aim to remove, as far as is possible, grounds for such apprehensions. The combination of taxes now proposed constitutes, it is true, a partial Income Tax. A full Income Tax Law which aims at extracting an amount from each individual strictly in accordance with his capacity to pay is ipso facto a complicated piece of legislation which requires a considerable and highly trained staff for its successful administration. By omitting some of the refinements of a full Income Tax Law and by sacrificing a certain amount of revenue, it is nevertheless possible to devise a measure of taxation approximately, but only approximately, adjusted to individual capacity to pay and avoid detailed inquiries into personal circumstances, particulars of partnerships and so on. The Property Tax which we propose can easily be collected on the basis of the assessment made for the purposes of the Rating Ordinance. 1901. Similarly, the collection of the Salaries Tax involves no administrative difficulties since employers will be required to furnish returns of remuneration paid to their employees. Corporation Profits Tax will affect all companies in varying degree and in the case of those corporations whose business is confined to the Colony assessment should present no great difficulty. The main difficulty, admittedly, will arise in the collec- tion of Business Profits Tax, though on grounds of equity such a tax must be imposed if there is to be a Corporation Profits Tax; but in view of the purpose for which the four taxes will be used there should be no attempt at evasion. Difficulties will also arise in the case of companies trading in and outside the Colony, but these are not unsurmountable. As regards the possible effects of the proposed measures on the business prosperity of the Colony, we consider that, although the imposition of these taxes involves a new departure in fiscal policy the results of which cannot he foreseen, any possible ill effects will be largely safeguarded against by the condi- tions with which we qualify our recommendations.
Chapter III.
Recommendations and Conclusion.
1. For the reasons stated in Chapter II we recommend that Government should proceed with measures on the lines of the attached War Revenue Bill (Appendix).
2. We desire, however, to qualify our recommendation by the following conditions:-
(i) The measures of taxation provided for in the Bill should be confined to the period of the war, that is to say, no tax shall be collectable in respect of any year of assessment subsequent to the year of assessment in which the war is terminated.
(ii) The rates of taxation suggested in the draft War Revenue Bill are con- sidered reasonable; but it is essential, in order to allay apprehensions which might lead to the flight of capital or discouragement of the influx of new capital, that such rates should not be excessive and that, once the taxes have been imposed, those rates should not be increased. In this connexion it is noteworthy that the Taxation Committee