"The allowances Government
Mas
provisionally in mind are earned in- come allowance, one-tenth of earned income up to $15,000; personal al- lowance, $1,800 for a single man plus $1,350 for a wife; children, $1,000 fori the first child and $600 for each suh- sequent child. The 5% rate would be; charged on the first $3,000 after de- ducting allowances.
for
with
Under this scheme, the exemption limit would be $1,800 per annum unearned income and $2,000 for earn- ed income; and a married man two children would be exempt up to $5,280 per annum and would only pay the full rate of 10% on income in ex- cess of $8,600 per annum. The follow- ing are random examples of the tax payable by such a man on various in- comes, ignoring a possible surtax on the highest incomes, a matter which is still receiving the consideration of Government.
£ 400 per annum £750 per annum £1,250 per annum
Administration
$50
$455 $1,225
now
"Before leaving this subject of in- come tax would say a word about its administration. The Taxation Committee recommended that there should be a preliminary expert in- vestigation of the administrative difficulties; but circumstances render it impossible to secure the services of an expert and Govern- ment had to decide either to go ahead at once or to wait until after the war, when of course the urgent need would have vanished. It is equally impossible to get an expert from home even to help start the Depart- ment and we must do it with our own
resources.
"Government is only too well
that is aware that
a formidable undertaking and I most earnestly crave the patience and indulgence of this Council if in order to make this new departure a success in the short time at our disposal we have to ask in the beginning for what may seem an extravagant temporary establish- ment.
"I also crave the patience of the public who will have to put up with the mistakes and delays which we can hardly avoid in the early stages. I can only promise that we will do our best and express a hope that we may receive helpful co-operation from the public.
"I come finally to the measures of exchange control and other steps to safeguard our foreign exchange re- sources which have been taken, or are in contemplation, on which Your Excellency has desired me to make a statement for the information of will be honourable members. It necessary for the home Government to make very large purchases for war purposes from non-sterling countries including Canada, the United States and the neutral European countries. They will need all the resources they can obtain in the currencies of those countries.
Exchange Control
"The first objective of exchange control measures is therefore to secure as far as possible that foreign exchange which may be held or may by re- be acquired in the future sidents in the United Kingdom and the other parts of the Empire whose currencies are on a sterling basis should be made available to the Gov- ernment.
"In their full form the necessary measures include the taking over by Government of all sums held in for- eign currencies by residents in the countries concerned and the surren- der to Government of all sums sub-
3
sequently acquired by such residents whether as interest on overseas in- vestments or as the result of the ex- port of goods to foreign countries.
"To control the surrender of the proceeds of exports a system is intro- duced by which exports are only per- mitted by licence which requires such surrender as one of its conditions. Having got control of all the available foreign exchange resources Govern- ment then secures that they are
which used only for purposes considered essential or desirable by limiting purchases of foreign cur- rencies by the public to authorized dealers who are instructed by the central authority as to the purposes for which exchange may be sold.
are
"This again is backed by a system of import licensing which requires the approval of some Government authority before any imports can be admitted. As yet a further measure, direct steps are taken to prohibit ab- solutely the import of commodities which are regarded entirely luxuries.
"The
as
circumstances of Hongkong and particularly the great enterpot trade and financial business upon which the Colony lives render im- possible or at least highly dangerous the adoption here of the full mea- sures of control adopted as above in the home country and elsewhere in the British Colonies.
Limited Purchases
"First we have limited purchases by the public of foreign exchange generally to authorized dealers, who both include all the larger banks. British and foreign, in the Colony. Those authorized dealers act on in-
Government structions from
as to the purposes for which exchange may be sold and speculative transactions and transfers of capital are absouletly forbidden.
"Secondly, Government has re- quired the surrender of foreign ex- change holdings but this requirement has been limited to British subjects of the difficulty of applying it more generally in this international com- munity of ours. Such exchange transferred to Government is of course paid for in Hongkong dollars or sterling.
'We have taken power also to re- quire any British subject to surrender to Government any foreign erchange which he may subsequently acquire but it is not the intention to apply the that to exchange acquired in ordinary course of business. Such exchange is normally sold to one of the authorized dealers and through the control of sales of exchange it thereby remains within the control of the sterling system provided that we have the full co-operation of the banks concerned.
our
"I should like to take
this op- portunity to state my belief that we shall get that co-operation from all the banks operating in this Colony and my gratitude to those banks for the help they have given to Govern- ment so far and the patience with which they have borne with somewhat fumbling first attempts in this unfamiliar field of control.
Certain Exceptions "Because of our peculiar circum- stances we have had to make certain exceptions even in the field of sale of exchange. Both exports of Hong- kong and Chinese bank notes and remittances of small sums to the in- terior of China are either completely free or subjected to only a loose con- trol. In view of that the authorities at home have felt obliged to refuse absolutely unrestricted dealings be- tween London and Hongkong lest there should be a leakage of funds from London through Hongkong. We have however been assured that the authorities in London will provide exchange for all legitimate purposes and sterling transactions in Hong- kong itself are completely unrestrict- ed.
49