WEDNESDAY, MARCH 29, 1978
COMMENTING ON THE FINANCIAL SECRETARY'S FISCAL POLICY, MR. LEE RECALLED THAT THE THIRD INLAND REVENUE ORDINANCE REVIEW COMMITTEE HAD RECOMMENDED THE TAXING OF INTEREST RECEIVED ON FUNDS USED BY A BORROWER TO PRODUCE PROFITS CHARGEABLE TO HONG KONG TAX.
THIS WAS BASED ON THE VIEW THAT ALL SIGNIFICANT FLOWS OF INCOME WHICH ARE THE RESULT OF ECCNOPIC ACTIVITY CARRIED ON IN HONG KONG SHOULD BE TAXED.
THE GOVERNMENT WORKING PARTY ACCEPTED THIS RECOMMENDATION AND WITH A VIEW TO OBVIATE PROBLEMS OF APPORTIONMENT OF FUNDS, CONCLUDED THAT A SUPPLEMENTARY SOURCE TEST RELATED TO THE ACTIVITIES OF THE BORROWER SHOULD BE APPLIED.
IN THE EVENT HOWEVER, MR. LEE SAID, THE GOVERNMENT TOOK THE VIEW THAT THE IMPLICATIONS OF APPLYING SUCH A TEST WERE UNACCEPTABLE, THUS GIVING RISE TO A TAX LOOPHOLE AND REVERTING THE SITUATION TO THE TIME WHEN THIS LOOPHOLE WAS FIRST REFERRED TO THE REVIEW COMMITTEE BY THE COMMISSIONER OF INLAND REVENUE.
+ALREADY, HE SAID, +WE HAVE SEEN HONG KONG DOLLAR LOANS PROVIDED FROM FUNDS IN HONG KONG BEING STRUCTURED TO AVOID INTEREST TAX. THE GOVERNMENT'S DECISION MAY FURTHER ENCOURAGE MOVEMENTS TO STRUCTURE FUTURE LCANS IN THIS WAY.+
THIS WILL RESULT IN FURTHER LOSS OF REVENUE, AND WILL BE UNFAIR TO THE SMALLER BORROWERS, HO UNLIKE THE SOPHISTICATED, WILL NOT FIND IT EASY TO ARRANGE SUCH AN INTEREST-TAX-FREE LOAN.
ON THE FINANCIAL ADMINISTRATION OF THE GOVERNMENT,
MR. LEE POINTED OUT THAT THE VOLUME OF TRANSACTION IN THE GENERAL REVENUE ACCOUNT AND CONSOLIDATED ACCOUNT, AT $20,000 MILLION AND $23,000 MILLION RESPECTIVELY IN THE COMING YEAR, HAS GROWN VERY SUBSTANTIALLY.
ALTHOUGH MORE FINANCIAL AUTHORITY AND FLEXIBILITY HAVE BEEN ALLOWED HEADS OF DEPARTMENTS, Y DIRECT DELEGATION FROM THE LEGISLATIVE COUNCIL AND INDIRECTLY BY REQUIRING FEWER ANNUALLY RECURRENT SUB-HEADS TO BE SHOWN IN THE ESTIMATES, +THESE WERE CHANGES CF DEGREES AND HOT CHANGES IN THE BASIC SYSTEM, HE SAID.
HE RECOMMENDED THAT A WORKING PARTY, HEADED BY THE FINANCIAL SECRETARY, BE FORMED TO STUDY HETHER ANY BASIC CHANGE IN THE DIRECTION OF SMPLIFIC/TICK AND DELEGATION IS CALLED FOR, TO ACHIEVE GREATER PRODUCTIVITY AND EXPEDIENCY.
THE WORKING PARTY MAY ALSO INCLUDE SCHE UNOFFICIALS OF THE COUNCIL AS THERE WOULD BE FURTHER RELAXATION OF VOTE CONTROL BY THE LEGISLATIVE,
WITH THE PROPOSED PUBLIC ACCOULTS COMMITTEE SOON COMING INTO BEING TO WORK WITH THE DIRECTOR OF AUDIT, MR. LEE WAS SURE THAT CAREFULLY DEVISED MEASURES FOR SIMPLIFICATION AND DELEGATION WILL ONLY ASSIST TO MONITOR THE SPENDING OF PUBLIC FUNDS FOR THE VALUE AND PURPOSE THEY ARE VOTED FOR.
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