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HONG KONG LEGISLATIVE COUNCIL.
purposes. I cannot emphasise too often the apparently general agree- ment on that issue because it relieves me of the necessity to answer such objections to Income Tax as that it will injure business by increasing charges and costs. That must be true of the raising of the same amount of revenue by any other means and if we are weighing income tax against other alternatives, objections of that nature must weigh down each scale equally. In fact, it is the general opinion of economists and is amply borne out by experience elsewhere, that income tax constitutes less of an addition to the true costs of a business than any other form of taxation.
One other suggestion which has not been put in its extreme form in this Council is that we are absolved from lending any more assistance to the Imperial Government because we make a regular Defence Contribution in peace time. In effect, Hong Kong is to be in the Empire on a basis of limited liability. What do honourable members imagine would be the effect if the taxpayer at home had said "we have paid to keep up an Army and Navy in peace time and we shan't pay any more now"? The present war would have been lost by now and if that policy had been pursued in the past there would have been no British Empire and no Hong Kong.
Turning more directly to income tax, a suggestion which has been given a good deal of prominence is that because the Colony is alleged to have been suffering during the last two years from trade depression consequent on the Sino-Japanese hostilities the imposition of income tax would be an intolerable burden. I find that argument almost impossible to understand. I am not going to discuss in detail whether there has been any such trade depression. The increase in the Colony's revenue by approximately 25% since 1937, and the increased dividends paid by practically all the local companies point in an entirely opposite direction. So does the analysis made by my Honourable friend Mr. Lo in his speech this afternoon, although I should like to make clear at once that I do not by any means accept all his conclusions. But if it were true that nobody has been making any profits for the last two years I cannot see where the burden of an income tax comes in. The great beauty of an income tax is that if you have no income you pay no tax, and if it were really true that the business man and the pro- perty owner had been making no profits the only people who would remain liable to income tax would be Government officials, for whom I am surprised to find such active public sympathy.
More seriously, the question whether profits are now as large as they were some time ago affects not the equity of the tax but its probable yield. If the gloomier views which have been put forward are justified Government may be disappointed in the yield, but those people who have not been making profits will not be called upon to pay any income tax. I would interpose at this stage that I can think of no other tax which could equally well be guaranteed to avoid hitting the unfortunate business man who has made no profit.