T. 2015/4/40.
Dear Caine,
SECRETARIES' OFFICE,
INLAND REVENUE,
(1spare) 38
153
SOMERSET HOUSE, LONDON, W.C.2.
31
renal
Couzd
44.
13th May, 1940.
We have examined the draft of the Hong Kong War Revenue Ordinance which you sent me on the 10th April (54002/40) Land I attach some notes on a number of points which require consideration.
The drafting of the Bill is very loose and it is a pity that the draftsman did not have regard to the drafting of the Model Ordinance prepared by the Departmental Committee of 1922 (Cmd. 1788), which covers much of the same ground, i.e. definition of chargeable income, exemptions, allowances, trustees, agents, etc. What troubles us more, however, is that the proposals in the Bill are open to serious criticism in principle. As the Committee recognises, the proposals involve inequality of burdens between individuals and this is likely to be a fruitful cause of evasion. I understood from you that the limitations of the Bill are dictated by local conditions peculiar to Hong Kong, but in our view these inequalities are likely to increase rather than diminish the difficulties of administration and the possibilities of evasion.
If I rightly understand the report of the War Revenue Committee (Chapter 2, Paragraph 8) the principal objection to a general income tax, apart from apprehended difficulties of administration, was that it would have applied to all profits wherever made. This need not necessarily be' so: the Model Ordinance is restricted to income "accruing in, derived from, or received in",
the territory and the scope of the proposals could have been limited to profits made in the territory. Nor is there any difficųłty about exempting profits made in Hong Kong which are chargeable to income tax in the United Kingdom or some part of the Empire. Indeed, these latter restrictions are actually incorporated in the present Bill (Clauses 13-15, but see the Note on Clause 15).
S. Caine, Esq.