Those present at the meeting were: His Excellency the Governor (Sir G. A. S. Northcote, K.C.M.G.).
The Acting Officer Commanding| the troops (Brigadier A. B. Thom- son).
The Colonial Secretary (Hon. Mr. N. L. Smith, C.M.G.).
The Attorney General (Hon. Mr. C. G. Alabaster O.B.E., K.C.),
The Secretary for Chinese Affairs (Hon. Mr. R. A. C. North)..
The Financial Secretary (Hon. Mr. S. Caine).
Hon. Commander G. F. Hole, R.N. (Retired), (Harbour Master).
Hon. Dr. P. S. Selwyn-Clarke, M.C., (Director of Medical Services).
Hon. Mr. T. H. King (Commis- sioner of Police).
Hon. Mr. A. B. Purves (Director] of Public Works).
Hon. Sir Henry Pollock. K.T., K.C.,
LL.D.
Hon. Mr. S. H. Dodwell.
Hon. Mr. Chau Tsun-nin, C.B.E.
Hon. Mr. Lo Man-kam.
Hon. Mr. Leo d'Almada e'Castro Jr.
Hon. Mr. T. E. Pearce. Hon. Mr. A. L. Shields. Hon. Mr. Li Tse-fong.
Mr. C. B. Burgess (Deputy Clerk of Councils).
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H,E. The Governor-When I ad- journed Council a week ago, the Hon. Mr. Shields, who had been speaking, made a request that he be allowed to continue his speech to- day. I was disposed to consider that request and as the standing orders cover it I therefore call upon Mr. Shields to continue his speech.
Hon. Mr. Shields: Hon. Mr.
A. L. Shields: Your Excellency.
glad am have the opportunity, owing to the adjournment of the debate on the War Budget, of considering the speech made by the Hon. Financial Secretary in support of the Income Tax measure proposed by Govern- ment, in which he dealt with the storm of disapproval from all sec- tions of the community as voiced by the Unifficial members of Council, who preceded him.
ably
The Financial Secretary handled the case for Government but dismissed in cavalier fashion the alternatives for providing a contribu- tion to the Imperial Exchequer which had been put forward by representa- tives of many interests. The good- will and co-operation of the people in a matter of this kind are important, if not
successful essential to the carrying out of your Excellency's laudable desire that Hongkong should do its bit towards financing the war. The Official Majority
I make this assertion, Sir, as I imagine it prompted your statement that Government did not intend to use the Official majority to put through a measure which the people believed to be detrimental to the welfare of the Colony in order to provide a gift from these people to the Home Government.
I have not been able
to get an official copy of your remarks, Sir, But I believe I have correctly inter- preted them in my own words.
As you are aware, the General Committee of the Chamber of Com- merce held a meeting and after dis- cussion and consideration they de- Income cided unanimously against Tax.
They recommended other alter- natives which had also been carefully considered, and gave their opinion that the proposal to raise three mil- lion dollars for local defence and seven million dollars as a grant for war purposes was too high, as it would be detrimental to the welfare
of the Colony if such a large sum was taken out of the Colony, giving
no return.
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The Chinese Chamber of Com- merce hold similar views which have been expressed by my Unofficial col- leagues and enquiries made from merchants, Bankers and people in many walks of life, make it clear that public opinion is almost entirely against Income Tax.
Indications are not lacking that the Unofficial members of this Coun- cil are solidly against Income Tax, but I believe they will be as solidly in favour of raising a War contri- bution by other means.
"The Committee of the Chamber of Commerce proposed other taxes to produce about $5,200,000 to cover local defence and a contribution to the Home Government. These taxes may not be free from criticism, but they deserve careful examination as they have the great advantage of costing practically nothing to collect. Government may suggest other alter- natives which will satisfy the com- munity and for these reasons, Sir, I would urge that the terms of refer- ence of the Taxation Committee now sitting be broadened to include the examination of alternatives.
No Compromise Speech "The very able speech of the Hon. Financial Secretary impressed me as one of no compromise. Nothing but Income Tax will do, all arguments against it are torn to shreds, the business community, bankers, inves- tors, manufacturers, etc. should swal- low the distasteful draught and be- lieve it to be less harmful than any other nostrum which they might prefer to try.
"We British are credited with being experts in compromise and the middle course, but there is no confirmation of this in the Hon. Financial Secretary's speech. He set out to confound the opposition to his pet tax and may have done so entirely to his own satisfaction but the people who must pay the fiddler, apparently still dis- like the tune.
"In comparing taxation in Hong- kong with other places one has only to examine the high cost of living here to find that one of the contribu- tory factors is the high price of land. Government is the ground landlord and the high price it obtains for land has to be paid for ultimately by the tenants. Land sales have been an important item of Revenue. Rents which are based on a return on the investment in land and buildings are also the basis of assessment. It was said that when land in the business centre was $60 and over per square foot it was dearer than land in Lombard Street in the City of Lon- don. I admit the value of the dollar was higher than at present.
"Rents of private dwellings are higher than in England which is partly due to the cost of preparing sites, the charges for sewerage and water connections, permits for access over Crown Land, etc.
annum
"A man at Home paying £40 per annum for a house in the suburbs with taxes at three times the rate in ¦ Hongkong (say 50%), pays the equivalent of $960 per
or num or $80 per month. What can he get in Hongkong for that rent in- clusive of the present 17% rate?
Previous Ingenuity ""The long list of Government charges for permits, stamp fees, etc., must be considered. Many things from permission to work a steamer on Sunday to permission to park a car in Duddell Street have to be ob- tained by permit at a price. Great! ingenuity on the part of successive; Colonial Treasurers has been display- ed in finding these methods of creasing Revenue.
Official signatures, for instance, are estimated
to pro- duce $40,000 in the 1940-41 budget. A charter party signed in Hongkong is taxed at 15 cents per $100 of the
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charter money which for a big ship amounts to hundreds of dollars. In London charter parties require a 6d stamp for each signed copy.
"Salaries here are admittedly high- er than at Home-they have to be- but house rent is not deductable from income for tax purposes. It would probably be surprising to find how many families with children to educate and provision to make for retirement must economise in every way to get along. The imposition of an Income Tax would mean in many cases an adjustment of salaries falling on the employer, who would also pay tax on his business profits and still have to compete with mer- chants in other ports for the trade of China.
"One objection, I believe, to the alternative taxes proposed by the Chamber of Commerce and the Chinese Community is that they do not get at unlimited partnerships and salaried employees including Govern- 'ment Servants, but if this cannot be accomplished I believe a request for voluntary contributions would meet with an immediate response from many who would contribute accord- ing to their means. I firmly believe there is no unwillingness to pay to- wards the cost of the War.
Important Objection
An important objection to Income Tax is that Home Government will have to refund such a large propor- tion of the total collection that the net contribution to the United King- dom may be greatly reduced, and to get that everyone will suffer a big disturbance in paying and reclaiming and the net result may not be worth it.
The Hon. Mr. Caine dealt with the vexed question of evasion.
"If Income Tax should prove to be 50% ineffective would he propose to discontinue it after an expensive department had been set up to collect
it?
"So many objections have been made to Income Tax that I need not say more than that the Hon. Financial Secretary seems to be ploughing a very lonely furrow. A perusal of all that has been said in this debate leaves one with the same impression as the proud Mother whose son had joined the Army. She turned out to see his Regiment on the march and was surprised to find that they were all out of step with her Peter." (applause).
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AN EXPLANATION The Financial Secretary.—I rise] not to make another speech but to ask Your Excellency's permission to make a personal explanation with regard to the speech I made at the last_meeting of the Council.
There was a sentence in that speech which could conceivably have been interpreted as imputing impro- per motives to members Council. I said that if suggestions of this were made that Income Tax should not be introduced in this because it would not be quite 100 Colony per cent effective, I could not but suspect that they covered some other motives. It was not in my
mind that any Member of this Council had opposed Income Tax principally on that ground. In fact, I had in my mind when saying those particular words, criticisms to that effect in the Press. I had stated at the be- ginning of my speech that I pro- posed to deal with Members' com- ments as well as remarks made by the Press, and I wish clear that it was very far from my to make it thoughts to suggest that any Member of this Council had any other motive but the best interests of this Colony. (Applause).
Hon. Sir Henry Pollock.-On be- half of the Unofficial Members of this Council, I should like to thank the Hon. Financial Secretary for statement he has just made.
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