134
HONG KONG LEGISLATIVE COUNCIL.
unessential goods would deflect men, materials and shipping from war purposes. In this connexion I may say that I had already given orders that work on my successor's new house should be stopped before this wise advice was received!
So much for the expenditure estimates in the ordinary budget, which will be more fully explained by the Honourable the Financial Secretary in his speech this afternoon and in the memorandum prepared by him. On the Revenue side there are considerable alterations to be made, but these do not appear in the printed volume. The most important of them are the increases in duties on petrol and alcoholic liquors which have a dual purpose, viz., to raise more revenue and to effectuate the policy of conserving sterling exchange: the other implement certain recommendations of the Taxation Committee and I will leave it to my Honourable friend to state their nature.
The estimated financial outcome of what I have called the ordinary budget is a small surplus. That expectation is due partly to the additional revenue from the sources just mentioned and partly to the transfer of certain appropriate expenses to the defence budget. If, however, during the fifteen month period which the estimates cover it appears that a deficit is probable it should not be difficult to curtail expenditure, and especially capital expenditure, sufficiently to avoid that result.
I come now to the defence budget, by means of which Hong Kong will make its contribution towards the prosecution of the war against Germany. That contribution may take one of two forms, the first being the meeting from our own pockets of such additional local expenditure as the situation may demand for volunteer naval, military and air defences and other war services; the other, free gifts in cash or in kind to His Majesty's Government towards its aim viz. the defeat of the enemy.
The former of these has its natural limitations and not wide ones at that: but I trust that not only every member of this House but also every citizen of this Colony will agree that there should be no limit upon the aid that we should give to His Majesty's Government other than our ultimate ability to pay. Quite obviously in this lightly taxed community that limit lies at a great distance and could not be reached through existing revenue channels. It is therefore necessary to create new means and Government has decided that an Income Tax is by far the most suitable. Steps will therefore be taken at once to draft the necessary legislation and to bring into being the necessary machinery. My hope is that within six months that machinery will be at work. Plans are not far enough advanced as yet for any detailed description, but in order to prevent unnecessary alarm I will say that it is not intended at the initial stage to prescribe very high rates of tax.
Attention has also been given to the question of taxing Excess Profits. There may plainly be justification for such a measure in due course, but I feel-and I know that my Honourable friend agrees
2/2