WEDNESDAY, JUNE 13, 1984
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+ THE WORRIES EXPRESSED IN THIS CONNECTION THEREFORE REMAIN, BUT UNOFFICIAL MEMBERS HAVE BEEN GIVEN AN UNDERTAKING THAT A 'DEPARTMENTAL INTERPRETATION AND PRACTISING NOTE' WILL BE ISSUED SO THAT THE PUBLIC WILL BE AWARE OF THE INLAND REVENUE DEPARTMENT'S CURRENT INTERPRETATION OF THIS SIMPLE PHRASE - A PHRASE THAT HAS SUCH CRUCIAL IMPORTANCE AS TO WHETHER TAX IS OR IS NOT PAYABLE,+ HE SAID.
TURNING TO THE SUBJECT OF THE TERRITORIAL SOURCE CONCEPT, MR BROWN SAID THAT UNOFFICIALS HAD ALREADY MADE THEIR POSITION CLEAR ON THE NEED NOT TO COMPROMISE THIS CORNERSTONE OF HONG KONG'S TAX LEGISLATION.
HE ADDED, +WE WERE MOST SATISFIED BY THE UNEQUIVOCAL UNDERTAKING GIVEN BY THE FINANCIAL SECRETARY IN THIS COUNCIL ON APRIL 25, 1984 WHEN HE REITERATED THAT THE GOVERNMENT 'REMAINED WEDDED TO THE PRINCIPAL THAT TAXATION SHOULD ONLY BE APPLIED TO INCOME ARISING FROM HONG KONG.+
HE SAID THAT THE FINANCIAL SECRETARY HAD UNDERLINED THIS COMMITMENT BY STATING CATEGORICALLY THAT NO PROPOSALS MADE BY HIM TO THE EXECUTIVE COUNCIL WOULD INCLUDE CHANGES TO THE BASIC TERRITORIAL SOURCE CRITERION.
+1 MENTION THIS AFTERNOON PARTLY TO UNDERLINE THE IMPORTANCE OF THE UNDERTAKING MADE, AND PARTLY BECAUSE IT DOES ANSWER - AND ANSWER MOST SATISFACTORILY MANY REPRESENTATIONS RECEIVED ON THIS KEY ISSUE, HE SAID.
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THE HON PETER C. WONG, ALSO SPEAKING IN SUPPORT OF THE MOTION, OUTLINED THE BACKGROUND LEADING TO THE INSERTION OF A NEW CLAUSE 4A WHICH WOULD HAVE THE EFFECT OF EXEMPTING UNIT TRUSTS FROM TAX LIABILITY IN RESPECT OF SUMS RECEIVED OR ACCRUED BY WAY OF
INTEREST.
HE SAID THAT THE UNIT TRUST INDUSTRY HAD PUT FORWARD POWERFUL ARGUMENTS THAT IN THE INTERESTS OF HONG KONG AS A FINANCIAL CENTRE, CERTAIN CONCESSIONS SHOULD BE MADE SO THAT IT WOULD BE VIABLE FOR THE INDUSTRY TO CONTINUE TO OPERATE IN HONG KONG.
+ THE AD HOC GROUP HAS CAREFULLY STUDIED THE INDUSTRY'S REPRESENTATION, AND AFTER CONSULTATION WITH THE ADMINISTRATION, COME TO THE CONCLUSION THAT HAVING REGARD TO THE UNIQUE CIRCUMSTANCES OF THE UNIT TRUST INDUSTRY, IT APPEARS THAT IT WOULD BE DESIRABLE TO GRANT SOME MEASURE OF RELIEF,+ HE ADDED.
HE RECALLED THAT AS A RESULT OF THE ENACTMENT OF THE INLAND REVENUE (AMENDMENT) (NO. 2) BILL IN 1983, THE POTENTIAL LIABILITY TO PROF ITS TAX ON GAINS DERIVED FROM THE DISPOSAL OF SECURITIES OF A UNIT TRUST HAD BEEN REMOVED. AND HE CONSIDERED THIS AS A RECOGNITION OF THE UNIQUE POSITION OF UNIT TRUSTS.
+WHEN THE PRESENT BILL WAS PUBLISHED, THE INDUSTRY MADE FURTHER REPRESENTATION EMPHASISING THAT IF THE POTENTIAL LIABILITY OF HONG KONG UNIT TRUSTS TO TAX ON INTEREST INCOME REMAINS, THE FUTURE OF HONG KONG'S UNIT TRUST INDUSTRY WILL BE DIMINISHED, TO THE DISADVANTAGE OF THE FINANCIAL SECTOR AS A WHOLE.
/+IT IS