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THURSDAY, OCTOBER 17, 1991
"BUT I I WOULD SUGGEST THAT ONLY RARELY WILL AN INVESTMENT DECISION BE DETERMINED BY THE POTENTIAL SIZE OF A TAX BILL WHERE RULING RATES OF TAX ARE LOW," HE SAID.
THE
MR AU-YEUNG SAID OTHER FACTORS SUCH AS THE NATURE OF POLITICAL ENVIRONMENT, EXISTENCE OF A WELL-DEVELOPED INFRASTRUCTURE, AVAILABILITY OF A SKILLED WORKFORCE, SECURITY OF RAW MATERIAL SUPPLIES, AND PROXIMITY TO THE PROPOSED MARKET MIGHT WELL HAVE EQUAL OR GREATER WEIGHT WHEN COMPARED TO THE TAXATION FACTOR.
"EVEN IF IT IE ASSUMED THAT TAX INCENTIVES DO ENCOURAHR INVESTMENT, IT DOES NOT FOLLOW THAT THEY REPRESENT THE BEST MEANS ENCOURAGEMENT, HE SAID.
OF
HE CAUTIONED THAT SUCH INCENTIVES MIGHT REPRESENT A cost to THE REVENUE WHICH WAS NOT COMPENSATED FOR BY ADDITIONAL INVESTMENT.
"OF COURSE, TO MAKE SURE THAT TAX INCENTIVES GO TO THE RIGHT RECIPIENTS THEY CAN BE OFFERED ON CONDITIONS THAT ARE JUST AS COMPLICATED AND DISCRETIONARY AS SUBSIDIES OR GRANTS," HE SAID.
AT
MR AU-YBUNG SAID ANOTHER MAJOR DISADVANTAGE OF TAX INCENTIVES, LEAST FROM THE TAX ADMINISTRATOR'S POINT OF VIEW, WAS THAT THEY COMPLICATED LEGISLATION AND PROVIDED AVENUES FOR AVOIDANCE ARRANGEMENTS.
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ON THE SUBJECT OF TAX INCENTIVES BEING EXPLOITED, HË SAID THERE WERE RECENTLY DIFFICULTIES IN HONG KONG.
FOR THIS REASON, HR SAID, LEGISLATION WOULD SHORTLY BR INTRODUCED TO TIGHTEN UP THE TERMS OF SECTION 16B OF THE INLAND REVENUE ORDINANCE.
"WE WANT TO MORE CLEARLY SPELL OUT OVERLOOKED BY SOME THAT THE SECTION WAS UPGRADING OF TECHNOLOGY IN LOCAL INDUSTRY,
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IT SEEMS TO HAVE
HAVE BIEN INTENDED то PROMOTE THE HE EXPLAINED.
FROM THE TAXPAYERS' POINT OF VIEW, TAX INCENTIVES HAD Á NUMBRĂ OF NEGATIVE ASPECTS.
MR AU-YEUNG SAID TAX INCENTIVES ALSO OFFENDED THE PRINCIPLE THAT TAX SHOULD BE LEVIED EQUITABLY.
OTHER INEQUITIES MIGHT ALSO BE DIFFICULT TO Avotb.
"BUSINESSES MAKING LOSSES WILL GENERALLY NOT RECEIVE ANY IMMEDIATE BENEFIT IN RESPECT OF TAX EXEMPTIONS EVEN THOUGH THEIR NEED WILL OFTEN BE GREATER THAN THAT OF PROFITABLE CONCERNS," HE SAID.
HE SAID TAX INCENTIVES MIGHT ALSO BE CRITICISED ON THE GROUND THAT THEY COULD INFLUENCE INVESTMENT PRIORITIES TOWARDS ASSŔTS YIELDING HIGHER TAX BENEFITS, BUT LOWER REAL PRODUCTIVITY.
"THIS CAN HAVE THE CONSEQUENCE THAT THE INCENTIVES
INCENTIVES ADVERSELY AFFECT RESOURCE ÁLLOCATION AND THE STRUCTURE OF THE ECONOMY," HE SAID.
/ONE FINÁL