HONG KONG LEGISLATIVE COUNCIL.
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Tax. I am aware that there is an increasing proportion of Chinese book-keeping which approaches European methods, but the bulk of Chinese business, whether connected with production or industry or with that preponderance which may be described as general trading, adheres to the systems which, although taking care of the specific profits on output or sales, do not take cognizance of general profits on enterprise.
In unincorporated partnership is issued a combined Balance Sheet and Income and Expenditure Account in which what is considered as the capital may be increased or decreased but in which the "profits for distribution" as such are not shown.
To those who claim that the information required for assessments may nevertheless be easily extracted, and to those who maintain that a partial transition from the present methods has been envisaged, I would make the same reply, namely, that all who are qualified to speak in such matters deny that such transformation appears feasible, except perhaps at the expense of much confusion and ultimate defeat.
In spite of marked and, we hope, permanent industrialisation which has been noted in recent years, the foundation of the Colony's business is still the merchant through whom business flows from the outside world to and from the mainland.
I need perhaps not remind Your Excellency that the book-keeping for the average Chinese merchant is divided into two very separate compartments. There is the general recording of transactions with the world at large which is dealt with by the employees of what is known as "the outer counter", but there is an additional set of books which are kept in "the inner counter" by the proprietor or partners of the business maintained under conditions of extreme privacy, to which no employees have access under any circumstances.
We must try to realise that an official invasion of the "inner counter" means to a Chinese business man a great deal more than the disclosure of his business secrets. To understand this we should appreciate that this privacy, which is traditional, has no origin in any attempt to evade taxation or to mislead official inquiry. It is not a question merely of disclosure of business secrets, of sources of supply or of customers, but of the breaking down of a traditional element in business procedure which has been regarded for centuries as a fundamental form of security, and with it would go a degree of con- fidence which might undermine the whole structure of business life.
It may be said that the assessments would depend only in part on the investigations of books, and that there are considerable sources from which reliable and indisputable information is available. These include income from public investments, public or private companies, from house properties, mortgages, salaries (which are a matter of record by employers), and all income which is remitted from abroad and which passes through recognized channels such as Banks.
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