5
12. H.K.
147
3-4-41
Kropert
53537/41* p. 152 in Hansard
ŵ cover behind 12.
There is a Means
This is the amended and consolidated War
Revenue Ordinance for Hong Kong which is based on the report of the Committee, summarised in my minute of the 3rd September overleaf.
The Government have in the main accepted the recommendations of the Committee's report, but they have taken certain steps to increase the rates of taxation beyond men the amount which the Committee recommended that it should be raised. It will be seen that the general rate of tax, which was originally 5 and 10, and which the Committeerise to 6% and 12%, has been raised in the Ordinance to 7 and 14% respectively. In the view of the Government, however, this increase might bear unduly hardly on persons paying the lower levels of salary tax, and accordingly the payment of this tax on the first $5,000 of taxable income will not, under the Ordinance, be increased beyond the 6 recommended by the Committee. On the other hand, Government had decided that the exemption limit of $4,800 a year was too high, and the Ordinance makes provision for its reduction to $3,600. In this connection I might draw attention to the statement made by Sir Geoffry Northcote in the Legislative Council on the 26th June, in which he referred to the position at which any businesssearning a profit exceeding $50,000 p.a. or any individuals earning more than 5,000 p.a. were taxed at identical rates. He expressed dissatisfaction at this position, but said he had decided, in view of the need of a statute on which to exerejne collect taxation during the current year, not to add to the Committee's terms of reference any instruction to consider the addition of a higher basic on supertax rates. It was, however, his intention, when he spoke, to appoint a Committee of very similar composition after the War Revenue Ordinance had got on the Statute Book to consider the advisability of replacing in the next financial year the war revenue taxes by an income tax supplemented possibly by an excess profits tax, or alternatively, if that proved undesirable, of developing the rate scales of the War Revenue Ordinance so as to tax higher profits and salaries according to their full ability to pay.
The long series of rearguard actions on the income tax question is therefore not over, and it will be interesting to see whether the Committee will this time have the courage to recommend the introduction of such a measure. It is clear that if Hong Kong is to increase its revenue to meet its increased war expenditure, it is in the higher levels of income for which they must look for further yield. It is obviously undesirable to attempt to raise any more revenue from the great mass of the working population of the Colony, and the wo middle class, at any rate as far as the Europeans are concerned, probably find that
Test for the cost evacuation makes things difficult for them. of mate facump
trances.
I have the following comments on the different Clauses of the Enactment:
Clause 2. The old definition of "profits made from transactions in the Colony" has been replaced by a new definition of "profits arising in or derived from the Colony" and "income arising in or derived from the Colony", which are said to come nearer to expressing the intention of the original Var Revenue Committee that the tax should be limited to income or profits made in the Colony. I am not quite clear as to its
effect