BY AIR MAIL.
57002
зу
159
War Taxation Department,
5th floor,
Pedder Building,
Hong Kong, 2nd May, 1940.
My dear Sydney,
21
Many thanks for your letter of 28th March enclosing the League of Nations report on "Taxation of Foreign and National Enterprises" Volume IV.
It deals exhaustively with methods of allocating taxable profits between administrations by more or less. arbitrary methods which suit the taxing authorities well enough, as they work both ways, and leave the taxpayer contented, as they eliminate double taxation.
There is a great deal of useful information on the devices in use abroad for distinguishing profits made by the various establishments of international traders which will probably be useful to us but it does not throw any light on the point which is worrying us here, i.e. what are "profits made from transactions in the Colony"?
If that phrase meant the same as "profits arising in or derived from the Colony" as the Inland Revenue people But those seem to suggest, we should know where we stood. responsible for the Ordinance quite obviously meant some- thing different as they deliberately rejected the latter for the former, and presumably a Court would rule that the intention was not "profits arising in or derived from the Colony". It would not be difficult to argue that the Intention was to tax only profits derived from the sale of
mported goods for consumption in the Colony and the manufac- uring profit on goods produced in Hong Kong for export. ʼn that basis we should collect precious little tax.
However, I shall be interested to learn what the Iland Revenue experts can suggest after seeing the Ordinance.
They will probably find some amusement in Section 16where a fine simple phrase "a reasonable sum for deprecia- ti" has been inserted in place of the original Sub-Section
awhich provided for depreciation of plant machinery and fires at rates laid down by the Commissioner. The follow- inglub-Sections were left untouched with the result that we all now have to allow depreciation and renewal of the sameisset, and what fun we shall have in finding reasonable
sums
Yours
Sincerely
S. Caine, Esq.,
Corial befi,
London
No. A
1940.
C.