Dear Radford,
12
25
Secretaries' Office,
INLAND REVENUE,
SOMERSET HOUSE, LONDON, W.C.2.
3rd August, 1948.
Pudney called on me, as arranged, on the 29th July, and I thought you might like a note of what happened, although I expect he had already covered most of it in his talks with you.
He said it would not be possible to introduce a more normal income tax code just yet. This is hardly a matter that concerns us, although we would like eventually to see something more like the model ordinance in operation, but his reasons (inadequate staff and the difficulties of persuading the Chinese to play the game) seemed very cogent.
He cannot consider a double taxation arrangement until the results of the first year's assessments are known. We could not contemplate an arrangement which omitted the reciprocal exemption of shipping profits, but foreign shipping bulks so largely in Hong Kong that they must first see how much revenue they would be likely to lose. He hopes to receive the figures before the end of his leave. we cannot press for a decision before they are available.
Obviously
Pudney satisfied us on the question of the Governor's power to exempt from tax, since he explained that the power rests with the Governor in Council, and not with the Governor personally.
Regarding the question of providing for taxation of income received in the Colony from abroad, he thought enforcement would be very difficult, since Hong Kong dollars circulate freely in China, and there is no possibility of check of what money crosses the frontier. I should point out, however, that prior to the introduction of the Defence (Finance) Regulations, we were almost entirely dependent upon the taxpayer's own returns for the assessment of remittances of income from abroad, though I think it probable that the average British taxpayer is rather more trustworthy than Pudney's clients.
R. E. Radford, Esq.
/He