(2/230/47)
No 57
CONFIDENTIAL.
Sir,
(34) on 147 file
(12)
PC.
54307/48
C/A Banarse (14) -Sandwain (15)
GOVERNMENT HOUSE,
HONG KONG,
189 18 March, 1948.
I have the honour to acknowledge the receipt of your confidential despatch No. 40 dated 7th February, 1948, regarding the Inland Revenue Ordinance, No. 20 of 1947, and to note that the power of disallowance will not be exercised in respect thereof.
2.
57
7
The initial difficulties encountered in setting up the organisation for the administration of this Ordinance have been acute and, as you are aware, from the numerous staff telegrams that you have received, the Inland Revenue Department is still labouring under great disadvantages in the matter of staff. As the work of assessment has fallen into arrears because of lack of qualified staff, the collection of tax in respect of the year 1947/48 will by no means be completed by the 31st March, 1948. From such returns as have already been received and listed for assessment as and when staff becomes available, it is expected that the total tax to be assessed in respect of the year 1947/48 will be over $30,000,000 as compared with the token estimate of $16,000,000 which was included in the budget before the standard rate of tax had been fixed. Actual collections, however, during the year are expected, according to the latest estimate of the Commissioner of Inland Revenue, to be in the neighbourhood of $14,000,000, this amount having been made up to a substantial extent by provisional assessments subject to review when adequate staff is available.
3.
In view of the difficulties under which the Department is labouring, I am glad to note that you do not consider it necessary that steps
The levels should be taken at present to increase the revenue from this source. of the allowances and of the rate of tax at the moment are such that attempts
Any effort to stimulate yield at large scale evasion are not worth while. by altering these levels would undoubtedly provide the incentive for evasion, and I should be most reluctant to take this step until the Department is adequately staffed and equipped for dealing with any such development. present it is emphatically not so staffed.
40
At
You have in paragraph 3 of your despatch under reference referred to the lack of any provision in the Ordinance for the exemption of certain societies and organizations. No statutory or registered building or friendly societies or local authorities exist in the Colony, and it has not therefore been necessary to provide for their exemption. The question of charitable organizations has already arisen and the necessary provision is being made in
The amendment an amending Ordinance which is now in course of preparation. suggested in paragraph 5 of your despatch will be incorporated in this Ordinance.
5.
The question of providing in the Ordinance for taxation of income received in the Colony from abroad is not being overlooked, but again staff shortages alone render any such widening of the basis of taxation impracticable at the moment. This matter is to some extent bound up with the question of introducing arrangements with other Goverments for relief from double taxation, and I propose that Mr. Pudney, the Commissioner of Inland Revenue, should take the opportunity that will be affrded by his presence in England on leave later in the course of this year to discuss these points with you and with represen- tatives of the United Kingdom Inland Revenue Department. Subject to your approval, therefore, I propose to defer consideration until his return.
RECEIVED
I have the honour to be, Sir,
Your most obedient, humble servant,
30% 4.46
C. O. REGY
THE RIGHT HONOURABLE
A. CREECH JONES, M.P.
COMFOR.