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HONG KONG LEGISLATIVE COUNCIL.
I would like now to contradict the impression which seems to be circulating in the Colony that the Committee of the Chamber of Com- merce, of which I am one, was neither in favour of making any contribution to the Imperial War Chest, nor of paying Income Tax themselves. Nothing could be further from the truth. The Committee was unanmously in favour of a substantial contribution, their share of which they have no desire nor intention to evade. Only two considerations weigh with the Committee: firstly, will the introduction of Income Tax drive Chinese industrial enterprise and capital away from the Colony and prevent fresh capital and industries coming to it, and secondly, will not the organization for collecting it prove too costly?
The Committee's answer to both these questions was in the affirmative. We attached little importance to the danger of industrial enterprise being driven away from the Colony, for the single reason that most of it derives considerable benefit from Imperial Preference, but we came to the unanimous conclusion that the risk of a flight of capital was a very real one which should not be taken if our war contribution could be collected in some other way. In our position as a storage, distributing, and financing centre, with no mineral or agricultural wealth to speak of, we are on an entirely different footing to Ceylon and other Crown Colonies which have introduced Income Tax. Our trade is very largely dependent upon cheap money. In my own experience it has suffered very seriously on many occasions before from flights of capital, when interest rates have risen to 7% and 8% and seriously affected all industry and trade. In the light of the strenuous opposition of our Chinese colleagues who fear that it will have this effect, I personally feel that it might be a dangerous experiment.
This may seem strange advice from one whose Company is registered at Home, pays Home Income Tax and Excess Profits Tax, and on this account was at a serious disadvantage during the last war. Nevertheless, it is my considered opinion unless we can get over the Chinese objections. I recognize that none of us should rightly pass final judgment upon the subject until the Bill is before us and we know its terms. The Committee now sitting may succeed in devising some method of making it less objectionable to our friends. Under their terms of reference it is difficult to see how this can be achieved, but if it can, then the main objection I have to Income Tax will disappear.
There is another point which needs serious consideration before setting up an expensive collection department, which, if it is to do its work thoroughly I fear will almost certainly cost more than the four lakhs mentioned by the Hon. Financial Secretary. I doubt if the Government really appreciates how large a proportion of the tax, if applied throughout the Colony, would have to be refunded by the Home Government. I estimate that six large British concerns, apart from the purely local limited companies, would contribute a very
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