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3 There is one question of principle to which I think your attention ought to be drawn. In Section 89, the Governor- in-Council may by order exempt any person, office or institutio from payment of the whole or any portion of any tax chargeable under this Ordinance. We criticized a somewhat similar
(33)provision in the Malayan Income Tax Bill (Willis's letter of 521500th August 1947 to Cine).
e)
We think it would be better to
state the circumstances in which the Governor may make such an order, and I suggest that the words "on grounds of poverty or equity" should be inserted after the word "institution" in line 2 of Section 89.
A We are glad to see that in Sections 50 and 51 power is given to make double taxation Agreements with another country, and to give tax credits in conformity with any such double taxation Agreement. Pudney is probably very fully occupied at present withh the business of organising his Department, but subject to the approval of the Colonial Office we would like him to consider the desirability of a double taxation Agreement with the United Kingdom as soon as he can spare the time. In view of the restricted scope of the charge to tax in Hong Kong, the provisions of the Model Double Taxation Arrangement with other Colonies may not be entirely suitable for Hong Kong; we will let you have our proposals in the form of draft arrangement whenever you like, but you may wish to write to Pudney before asking us to do anything.
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I am enclosing two carbon copies of this letter in case you want to give one to Boss and send one to Pudney.
Yours sincerely,
sincerg's
Hilbih