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WEDNESDAY, AUGUST 14, 1974
MR. HADDON-CAVE SAID THAT QUITE APART FROM THE VERY DOUBTFUL CASE FOR THE ABOLITION OF INTEREST WITHHOLDING TAX, THERE VERE AT LEAST TWO ARCULENTS AGAINST ADOLITION.
IN THE FIRST PLACE, HE SAID, THE RELIEF GIVEN WOULD EFFECTIVELY WIND UP WITH THE FINANCIAL SECTOR AND THE UCALTHIER GROUPS IN OUR SOCIETY AND THIS COULD DE INEQUITABLE.
SECONDLY, THE POSSIBILITY LOULD ARISE OF NON-RESIDENTS SWITCHING HIGHLY VOLATILE SPECULATIVE FUIDS TO LONG KONG DOLLARS WHEN THEY DECIDED TO TAKE A PARTICULAR VIEW OF RELATIVE EXCHANGE RISKS AND THEN SUITCHING THE OUT AGA IN WHEN THAT VIEU CHANCED.
HE POINTED OUT THAT THE CONSEQUENCES FOR THE MONEY SUPPLY AND THE EXCHANCE VALUE OF THE HONG KONG DOLLAR WOULD THEN BE OBVIOUS AND THAT IT WOULD BE IRRESPONSIBLE TO OVERLOOK THE DAMPENING EFFECT ON DESTABILISING HARD FLOUS OF THE VITMOLDING TAX.
REFERRING TO THE SUGGESTION THAT NON-CESIDENTS SHOULD BE EXEMPTED FROM THE PAYMENT OF THE INTEREST WITIKOLDING TAX, MR. HADDON-CAVE SAID THAT THIS COULD PRESENT EKORNDUS ADMINISTRATIVE DIFFICULTIES COTH FOR THE BANKS AND FOR THE INLAND REVENUE DEPARTIENT, WHICH ONLY THE EXISTENCE OF EXCHANCE CONTROLS COULD OVERCOME.
+ IN ANY CASE, HE SAID, I WOULD NOT BE KEEN TO ENCOURAGE VOLATILE INFLOUS OF SPECULATIVE OVERSEAS FUNDS.+
THE FINANCIAL SECRETARY WAS ALSO AGAINST THE IDEA OF ABOLISHING THE TAX FOR DEPOSITS UITH LICENCED BANKS IN VIEW OF THE DAMAGE IT COULD CAUSE TO HONG KONG'S DEVELOPING KONEY MARKET.
HE ALSO REFERRED TO ANOTHER SUGGESTION FOR PARTIAL ABOLITION WHICH HE HINGELF HAD FLOATED IN LAST YEAR'S BUDGET SPEECH. THIS WAS THE EXEMPTION OF CERTAIN FOREIGN CURRENCY DEPOSITS, WHICH HE NOTED, WOULD SIMPLY GIVE THE BUSINESS TO LOCAL BANKS AND FINANCE HOUSES STEAD OF OVERSEAS HISTITUTIONS.
+THIS IS A WORTHY KOTIVE,+ HE SAID, +BUT ALL THE INDICATIONS 1 HAVE ARE THAT THE NUMBER OF BANKS WHICH COULD BE PREPARED TO PAY THE PRICE, IN THE FORM OF PROFITS TAX ON TEIR +TURN+ IS VERY SMALL.
+THE HAJORITY OF BANKS AND FINANCE HOUSES, WHILE EAGER FOR THE PRESTIGE OF A LICENCE FOR A SPECIAL DEPARTMENT TO BORROW AND LEND FOREIGN CURRENCIES AND BE EXEIPT FROM THE OBLIGATION TO WITHHOLD TAX ON INTEREST PAID ON DEPOSITS, VOULD IN PRACTICE CONTHE TO AT SILY AS INTERMEDIATIES IN THE PLACING OF SUCH BUSINESS IN OTHER CENTRES CIERE IT ATTRACTS NEITHER INTEREST TAX NOR PROFITS TAX.+
HE THEREFORE CONCLUDED THAT UNTIL HE WAS SATISFIED THAT A VERY SUBSTANTIAL FLOU OF INCORE ASSESSACLE TO PROFITS TAX WOULD DE CGENERATED, HE WOULD NOT THINK THAT THE SETTING UP OF THE NECESSARY MACHINERY FOR THESE SPECIAL DEPARTIENTS WOULD BE JUSTIFIED.
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