1934-09-27 — Page 12

12

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SDAY,

-SEPTEMBER 27, 1934.

BUDGET LAUDED

(Continued from Page 11), view. In the special conditions of is found in the property values Hong Kong, with a large migratory which have fallen to an enorinous became vacant, and the third was population, a comparison of ax-extent. A fall in such values Is occupied by the owners himself. If burdens per head is no guide to not an effect merely, but is also, a a mortgage also exists, as it does policy. A maintenance of tax-bur-further, predisposing cause of de in many cases in these hard times, dens beyond the amount 'expedient pression, owing to the dependence the position is still worse, and the in view of our peculiar conditions of every line-of business upon every owner may be forced by the mort- would mean, in Hong Kong's case, other line. Any measure, there- gages to sell out at a ruinous price.ja loss of population and an ulti-fore, which is calculated to check

Point Illustrated

mate loss of revenue:

further depression in the property! To give another illustration. A It seems to me that the time has market, if not to stimulate it to common type of such three-storey now come, if it la not already over. new activity, is a measure which tenement houses is one in which due, when a strong atimulus to will distribute its beneficial effect the ground floor is used as a shop revival of confidence and prosperity throughout business as a whole. In this case the rents, when all is needed, and that such a stimulus The share market is in an unduly parts are occupied, may be $100 for could best be provided by the re-idepressed condition owing to the the ground-floor, and $40 for sach duction I now propose.

normal effect of bad times in which

of the two, upper floors. If, through It may be considered by soms many are compelled to sell their Blackness of trade, a condition too that a lowering of the Assessment holdings in order to raise money common to-day, the ground floor is Tax would benefit only an interest-for the purpose of carrying on unoccupied, the whole-tenement ed section of the public. I dissent their business or of reducing or system of assessment is a proper from the view which, no doubt, is paying off mortgages when forced tionately heavier burden upon the based on a wrong conception of to do so. This condition is further owner, and correspondingly more what the Assessment Tax means in accentuated by speculative in- disastrous in its results upon live- the public finance of the Colony,fluence. A favourable reaction in lihood.

This tax is the chief mode of direct the property market would help to I believe, therefore, that the taxation for Hong Kong, and must remove certain of the factors de assessment of Chinese tenement-be recognised as such. It provides pressing the share market, particu- houses by floors, is a measure which the main contribution to adminis-larly in relation to shares of real would ameliorate the situation by trative costs from the income of estate companies. This would fur lifting part of the burden now rest-the community. The incidence is ther help in restiring confidence in ing upon a large section of the not to be considered as determin- the established industries of the people, and by restoring in some ed by the visible process of its col- Colony. Experience shows that degree the purchasing power on lection. Like the Income Tax in there is always a correlation of which business activity so largely Great Britain, it is the principal movement between property values depends. The concession, in my medium whereby taxation is ad- and stocks values in this Colony, view, would not increase the risk (justed to governmental needs, though the two movements may of overcrowding. There would be When considerable increase is re-not synchronisa.. no inducement towards overcrowd-quired, the normal method is to "All The Difference"

•The

ing of floors any more than there raise it; when a remission of the Rent charges from a consider. is with the present system towards burden of taxation is called for table propertion of the costs of overcrowding of houses: At any the interests of the community, the many of our small businesses. A ruto, the matter can easily be re-lowering of this tax is the natural small reduction. In this item of his gulated by law,

medium of rellef.

costs may mean all the difference It is computed that the sugġra-| Psychological Factors to a small tradesman when he is tlun, if adopted, would involve a There may exist in some quarters hesitating whether it is worth loss in revenue of about $660,000. fat doubt that a reduction of

the while to

carry on. Property- This figure has been arrived at In Assessment Tax by 4 per cent. owners who at present and it 'dif- this way: The vacant floors ol would have material influence on eult, if not impossible, to make Chinese tenement houses are esti our economic situation, in view of concessions of this kind, would bel mated to represent roughly 10 the disparity between this compara enabled to do so, with a lighter per cent of all the rate-paying tively small percentage and the very Assessment Tax burden, and would) buildings in the Colony. Accord-large percentage of fall which has find it in their interest. to pass on ing to the report of the Assessor taken place in property values. But part of the relief obtained. for 1933-34, the total valuation of a mathematical comparison of per rate of mortality among amall the Colony is $38,941,278. Calcul-centages is here no true criterion.business, Involving in the mays ni ated on the above basis of 10 per Psychological factors, induced by serious loss to the Colony, would cent, the decrease In the total uncertainty and the absence of thus be checked. valuation is $3,894,127, and the ameliorative action, will drive With the return of confidence consequential loss to revenue, be-values down far below the devel and hope created by Governmental ing 17 per cent. on the latter figuro, justified by the true economic aitus-action promising such a substan- is about $660,000. I shall later on tion. People simply will not buy tial measure of relief, with the offer auggestions for meeting this at however attractive a price-assurance that Government was additional deficit.

not because the property offered is not adopting the laissez-faire policy not worth the price, but because of leaving recovery to find its own In regard to my third and most they are so uncertain about the way, hoarded money would come important recommendation-a re-future. A moderate stimulus, re- out; property would once HOTL duction in Assessed Taxes by moving or allaying this feeling of change hands; credit would expand | per cent may remind Your Ex-juncertainty, will do much more to as confidence expands; existing ellency that when this percentage restore value than a mere mathe-business. undertakings would be was added in 1930, strong protestsjmatical computation would lead us maintained; and so an all-round inr were raised by the Chinese com-to anticipate. No one would argue]provement may be expected. The munity. At a meeting of this that the effect of lowering the structure of the present-day Council held on the 20th October, British Income Tax by aixpence economic system is such that its 1930, when the Budget for the en-could be reckoned as stimulating various parts are interdependent,} suing year was under considera- trade and industry just to the ex-ja favourable muvement in any one) tion, I stated that the proposed in-tent of 2% per cent. The effect, quarter being generally reflected in crease had caused great concern largely acting through psychologi (similar movements in other quar- among the Chinese, and that, re-fal forces, has been far greater, asters, so that the amelioration be- presentations had been made to the we all know,

comes cumulative.

Third Recommendation

Chinese members of the Legislative But even the financial effect of Now, how is the loss in revenue Council by public bodies as well a 4 per cent. reduction on the to be made up, if the two proposals as by individuals urging that the economic life of the community were carried into effect? Happily, rate should remain at 18 per cent. would be very considerable. Tak-this is not a case in which an un- I also said that the opinion had ing the total rateable value at balanced Budget entails. an in- been expressed that in view of the $38,341,000, the reduction would crease in public indebtedness. The bad times, when cost of living was mean that the property-owners' increased deficit could, and should. very high and the volume of trade burden is lightened by about submit, be met out of the Colony's abnormally low, any increase in the $1,650,000. This figure represents surplus balances. The surplus of Rates would have an immediate a 6 per cent. yiek on a total of the Colony, it is true, is already reaction on the prosperity of the $25,000,000. In other words, there being substantially drawn upon to Colony (Hong Kong. Hansard 1930, would be a capital appreciation of balance the Budget for 1995; but page 205). Whether or not the real estate values in the Colony to that very fact makes it clear that subsequent further fall in trade the extent of $25,000,000.

the Government is not adverse to has been in part accentuated by On the same computation, the an encroachment on its reserves to the increase in the tax, it is, of estimated decrease of $660,000 in enable it to balance a Budget in course, impossible to prove either Rates from the change in the difficult times. If, as I have en- way. It is at least probable that method of assessment would mean deavoured to show, the suggested this-heavier-tax-burden-has-added an appreciation-real estate remission is expected to act as a 8th Oct. to the effects of the present de value of over $10,000,000,

stimulus to the Colony's business Thus, if the second and third and economic outlook, then the 5th Nov.pression..

But whatever the cause or causes, suggestions. made in my second policy of drawing on our surplu the economic conditions of the memorandum were adopted, pro- to meet this particular deficit would | Colony... have becomo: decidedly perty values in the Colony would be all the more justifiable; since it worse since the increase in the As at once-appreciate by the enormous would be done for the purpose of sessed Taxes was made in 1930. figure of $35,000,000, and the re-purauing, not a merely negativo | The Hop, Colonial Secretary has percussion on the economic aitus- policy, but a positively "remedial 6th Oct.

spoken of the difficulty, which the tion could not but be considerable, course of action. 2 6th Nor.

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the present alump, in the collec- On the other hand, the adoption: This further depletion of the tion of Rates: He further pointed of the two proposals would mean Colony's surplus balances would out the increased administrativen sacrifice, of revenue to the not be so serious as necessarily ta work entailed, leading to increas-amount of about $2,200,000. This deter Government from adopting BRITISH Steamers: Changte - Taiping. ed staff and, therefore, greater coat sum is made up of $1,550,000 (be-the course which I have urged. of administration, I trust. I may ing 4% of $88,941,000), and $600,-Some years ago it was officially an- say that this difficulty arose not 000 (being estimated loss entailed bounced, that rese

of bou 7th Oct.

because property owners do not by the new method of assessment). $10,000,000 was considered advis like to pay promptly as in better This is admittedly a considerable able by both the Government and 19th Oct." Itimes, but because they are not in sum, and would further greatly the Secretary of Stat for the a. position to do so. - Increased widen the gap between estimated Colonies as provision for a “rainy 30th Sept difficulty in the collection of a revenue and expenditure. Neverthe day!" so to speak. But even if

7th Oct's

tax-fs evidence that the tax is be I urge my suggestions on the what I have advocated meant 4th Octing levied at a rate which

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