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Governor and the Executive Couccil hold to be generally
sound.
(b) Corporations Profits Tax. The Committee
then considered the imposition of a tax on the profits
or dividends of public companies operating in Hong Kong.
The profits liable to such a tax are estimated at approximately $50,000,000 annually, which at 5 per cent
would yield a further $2,500,000. But such a tax they
consider to be liable to objection on the score of
equity, since it differentiates between those share-
holders who have invested in Hong Kong companies and
those whose investments are outside the Colony.
Governor and the Executive Council agree that an income
tax would be preferable to a corporation profits tax
as a fairer and more comprehensive method of raising
revenue.
The
(c) Income Tax. The pros and cons which the
Committee debated may be summarised as follows:
But it can
(1) The economic and geographical situation of the
Colony presents many loopholes for evasion.
be argued that these exist everywhere, and there is no
actual evidence to suggest that an Hong Kong evasion
could not be kept within reasonable lines.
Evasion has
not so far been an insoluble problem in Ceylon.
(2) The extremely mixed taxable community with
greatly differing standards of living make Hong Kong
unsuited to the tax. The Committee's answer is that
the tax would only become objectionable when its effect
was to reduce the standard of living to an unecomomic
and undesirable level; moreover there would exist the
usual scheme of allowances and exemptions.
(3) Many benefits are still to be derived from
preserving