1939-11-09 — Page 13

THE CHINA MAIL, NOVEMBER 9, 1939

MR. CAINE ANSWERS THE CRITICS

until a substantial body of opinion in the Colony believes that the tax can be levied fairly and efficiently."

ward without a due weighing of consequences, ̧.·

its.

(Continued from Page 12) of 321⁄2 million. If to this amount we

by practically all the local com were to add the special Defence ex-

panies and the analysis made by penditure of .24 million, and the Should some of the misgivings re-

GENERAL DEBIRE.

my Honourable friend Mr. Lo sin Military Contribution of 6 million, the garding this proposal, which are in- has been so fully confirmed by my

I start from the assumption which His speech this afternoonvali point total amount would come to $15,250,- dicated in the Taxation Committee's honourable friends among the unof

In an entirely oppoalte direction. 000.00, which is 46.9 per cent of the report, prove to be true, then the Co- ficial members that there is a general been making any profits for the last But if it were true that nobody has yearly average of 321⁄2 million. Ilony might well suffer a setback from willingness and desire to contribute two years, cannot see: where the cannot help thinking that the gift is which it might take her a very long | substantially to too much for the Colony, having re-time to recover.

the revenue of the burden of an income tax comes in. - At all events it is Government in order to enable the gard both to the Colony's position and difficult to imagine a set of circum-Government to

The great beauty of an income tax to the Imperial needs at the present stances more unpropitious than that able to the resources of this Colony no tax, if it were really true that, the lend assistance suit-is that if you have no income you pay time. I venture to think that for 1940, now obtaining for trying out an ex- towards the prosecution of the war. T business man and the property owner and until the Colony's position be-tremely controversial Ascal comes a little more clarified, the giftment, with its dangerous potentialities, the view expressed in some quarters, people who would remain liable to in- experi- do not propose, therefore, to deal with had been making no profits the only to England should not exceed $3,000,- The Chinese in the Colony, who con- the upshot of which is that the Colony come tax would be Government of-

stitute some 97 per cent of the popu- is not in a position to pay any extra ficials, for whom I am surprised As we are all agreed that the Colonylation, have for over two years, been taxation whatever. should make the best contribution of going, through 'a severe financial strain

And such active public sympathy. which it is capable, the problem con-

in order to render badly needed assis→ fronting this Council resolves itself tance to their Mother Country in her to one of finding the best means of hour of need. raising the money.

000.

UNDERLYING IDEA Since the underlying idea is a free and spontaneous gift by the Colony to England, and not a tribute to be exacted from an unwilling population. the following broad principles should, in my opinion, govern the choice of

ineans:-

nomy.

I cannot, however, allow to pass quite unanswered the attempt of my Hon. friend Mr. Lp to refute the statement that the Colony is lightly taxed.

•

A POINT TO PONDER

More seriously, the question whe- ther profits are now as large as they were some time ago affects not the equity of the tax but its probable yield. If the gloomier views which have been put forward are justified Government may be disappointed in the yield, but those people who have called upon to pay any income tax. not been making profits will not be

I would interpose at this stage that I can think of no other tax which could equally well be guaranteed to avold hitting the unfortunate business man who has made no profit.

no

DEPRESSING UNCERTAINTY That there is a depressing uncer-

That statement is not intended to tainty in the Colony's whole outlook refer to the obvious fact that the tax- is the authoritative view of the Fin-ation per head of population is a frac- ancial Secretary himself. tuitous increases in the Colony's re-

The for-tion of the taxation per head in the venue serve but to cloak the unsatis- because the standard of living of most United Kingdom. That is inevitable factory position of the Colony's eco- of the population is so much lower. (1) That, if possible, the means cho-"refugee" capital during the last two The flight to the Colony of

COMPARABLE INCOMES What is meant by the lightness of sen should not involve a violent de-years or so is due no doubt to Hong taxation here is a comparision be- parture from the Colony's fiscal policy. Kong being "a free port, without in tween the taxes paid here and elsc- which has been in existence for near- come tax and without excessive taxa- where by persons in receipt of com- ly a century; and

tion." Its maintenance in the Colony parable incomes. On that basis one' Another general complaint has been (2) That the means adopted should depends on a delicate equilibrium of has only to consider the various taxes about the alleged unequal incidence of command as much popular approval confidence and of opposing and com- one by one; the percentage of rent income tax. as possible: at least it should not go betitive financial attractions and draw-paid in rates is about one-third of the cluded a large number of complaints In this category are in- counter to deep-rooted and fundamen-backs, which may easily be upset. With average in England; tobacco, liquor and objections on matters of compar- tal objections of a substantial portion the dislocation and diminution of trade England or in most Colonies; in the exemption limit is too low or that the and petrol duties are lower than in atively minor detall, such as that the of the community.

caused by the war, and by the neces- United Kingdom Moreover, it seems to me that the sary war measures; with unemoloy- tariff, a standard customs of 10% on creased, amount of the gift should be subordin-ment caused by the closing down of all ordinary imports, in nearly all other should be given for various kinds of there is a genera" personal allowances should be in- ated to the means available, based on enemy businesses; with a "dead" pro- Colonies there is a similar tariff ex-

or that other allowances the above principles, rather than that perty market, and a "moribund" share

expenses or liabilities. Obviously the means should be adopted in viola-market: with a low dollar and ravidly cept that the rate is more often 15% objection of principle tion of those principles for the sake increasing costs of imported goods and and upwards, while here there is no

can exist to of obtaining an

making adjustments in those allow- arbitarily decided a concomitant increase in the cost of at a lower rate here than in the Unit-sentative Committee which Your Ex- general tariff at all; death' duties are ances if so advised by the very repre- amount. Accordingly I ani bound to living in general, and in face of re- say that I do not agree with the Gov-duced earnings the outlook for the sent no Income Tax, whereas Income and other details.

ed Kingdom; Hong Kong has at pre-cellency has set up to examine these ernment view that the imposition of Colony is indeed bleak. an income tax is by far the most suit- I am satisfied in my own mind that from the standard rate of 7/6 to no Tax in the United Kingdom rises able means to give effect to the natural the Colony's contribution can be rais- less than 17/- in the £ on high in-

If I may carry the war Into the enemy's camp desire of everyone to bear his

again, another justed by other means without incurring

beauty of Income Tax is precise- burden for the common cause, for it the risk of killing the goose that lays comes, and income taxes at various ly that such adjustments can he violates both of the principles I have the golden egg". I may incidentally rates have existed for many years in made in a way which is impossi- suggested.

point out that other alternatives wil husiness for years to study

a number of Colonies. It has been my

ble with any other tax,' obviate the expenditure of an annua'

Colonia

PERGUISITES required as administrative charges for adently assert that I know of no Co- sum of $320,000.00 which would

Anances and without burdening br

the Questions have also been asked as the collection of income tax.

Council with more figures I can con- to whether such and such perquisites of Government officials and others ony where the general level of tax- are to be taxed, for example, free and no more than one or two where treatment of such perquisites are con- ation in relation to income is lower houses.

Provisions laying down the it is as low.

tained in the draft bill now being examined by the Committee, and if they are thought to be inequitable ther the income tax assessment would they can be changed.

include the squeeze upon which so Other inquirers have asked whe-

many of us, official and unofficial, are popularly supposed to live.

FOR 25 YEARS

on

"NOT SUITABLE

EQUAL WEIGHT

I

There can be no reasonable doubt that views opposed to the introduction of income tax have been consistently held by many people in the Colony for at least a quarter of a century. More-income tax is not suitable for Hong Sir, it is my personal conviction that over, the Chinese opposition to this Kong, and cannot be equitably admin- measure must be well known to Gov-istered: that administrative. ernment. When the idea of an income will be excessively high; that it wil

charges tax was mooted in connection with the

In any case my Hon. friend has 1914-1918 war the then Senior Chinese venience to the public: and that it will denying that the Colony ought to raise cause untold irritation and incon-not pressed his view to the point of representative on this Council, the do irreparable harm to the Colony, more revenue for war purposes. late Mr. Lau Chu Pak, wrote in to Government a strong

am therefore opposed to its introduc-cannot emphasise too often the appar- memorandum against it. My Senior colleague

tion.

ently general agreement on that issue this Council, on the 10th November, strong hope that. Government will find to answer such objections to Income May I, in conclusion, express the because it relieves me of the necessity 1938, in anticipation of the appoint- it possible to adopt other alternatives. Tax as that it will injure business by ment and report of the Taxation Com-so as to enable the Colony to make, as increasing charges and costs. mittee, expressed himself strongly against it.

As a member of the Taxa-devotion to the common cause. a con- a humble gesture of its loyalty and tion Committee, which reported Your Excellency on the 5th April, 1939. terms of sterling and of the Imperia' to tribution which, though insignificant in I myself sent in to the Committee a expenditure, should he all the more memorandum setting out in detail my acceptable to the Mother Country be- own objections. Some of the grave doubts which are widely felt as to the cause it has been raised by measure possibility of the successful adminis- which command general approbations? tration of an income tax in the Co- lony were summarised in the Taxation Committee's. report, which include the following:-

43. The migratory nature of the Colony's population, and the extreme- ly mixed taxable community, greatly differing standards of living, with make Hong Kong unsuited to the tax generally.

FINANCIAL SECRETARY'S REPLY

and

That must be true of the rais- ing of the same amount of re. venue by any other means and If we aro weighing Income tax against other alternatives, objec tions of that nature must weigh down each scale equally.

In fact, it is the general opinion of economists and is amply borne out by experience elsewhere, that income tax constitutes less of an addition to the true costs of a business than any other form of taxation.

In effect, Hong Kong is to be In the Empire on a basis of:limit.... ed llability.

It is the dream of every zealous Income tax official that he will some day find a conscientious burglar who will make a full re- turn of the profits of his sion.

I have no doubt that he would similarly welcome a full disclosure from the recipients of squeeze, but

I fear that he will have to wait un- til those members of the public who claim to possess full information on the subject are. kind enough to com- municate it to the authorities. The other problems of assessment of income and allowances are primarily and will no doubt receive the due matters of the drafting of legislation attention of the Committee."

EVASION

com-

The third general class of ment relates to evasion. That peo- ple will try to evade taxation of any kind is certain, but there are means open to Government for detecting many kinds of attempts at evasion, agine would be the effect, if the: tax-for discussion by

What do honourable members in- and this matter also is largely one payer at home had said "we have paid which is examining, the draft legisla

the

Committee

peace time and to keep up an Army and Navy in tion. In the course of the long period we shan't pay any during which income tax has been In more. now?" The. present war would operation in the United Kingdom, 'n policy i had been pursued in the past evasion have been tried and a great have been lost by now and if that very great variety of methods of there would have been no British Em-"many ways of detecting them have pire and no Hong Kong.

been developed.

vening in the debate, said: The Coun- been put in its extreme form in this The Hon. Mr. Sydney Caine, inter- One other suggestion which has not

very ably certain objections to income lending any more assistance to the Im- cil has heard three speeches putting Council is that we are absolved from tax and it seems desirable that the perial Government because we make 4.. Many benefits are still to be de- should be stated at this stage rather peace time.

case which exists on the other side à regular Defence Contribution in rived from preserving the Colony as than at the end of the debate when a haven for "refugee" capital. The there will be no opportunity of fur- Colony's prosperity depends to a large ther rejoinder by any unofficial mem- extent on the fact that it is the entre-ber. I regret that I shall have to take pot of China, a free port, without in-up a great deal of the Council's time come tax and without excessive taxa- but I do not apologise for it, because tion. An unwise fiscal imposition may the issue is of such importance well upset this precarious prosperity" complexity that it would be wrong to 9. Ecoriomic and industrial de attempt to deal with it briefly. velopment-particularly of small fac- tories as yet in their infancy-would slon, to refer not only to comments In fact I propose, with your permis- be seriously affected:"

and suggestions which have been made in this Council, but to others which The Committee, whilst recommend-have been given publicity elsewhere. ing, the introduction of income tax in a certain eventuality "If it be con- sidered that the tax is capable of suc- cessful adininistration in the Colony", felt it necessary to qualify this recóm mendation in five ways, specified in the report, from which I merely quote two:

PREPORTS QUALIFICATION

If I reply somewhat caustically to some of the suggestions made In the Press I trust that, honour. able,members will realize that ! .am not suggesting that there are suggestions to which they would lend any support.

Furthermore, any vigour I may use

pver, the

'IMPOSSIBLE TO UNDERSTAND

Turning more directly to income be evaders are going to

I do not suppose that the tax, a suggestion which has been giv- methods, but at any rate the en a good deal of prominence is that thods, announced by because the Colony is alleged to have who claim to be au been suffering during the last two intentions of, the evad years from trate depression conse- ferent from the quent on the Sino-Japanese hostili- trade of the tax. ties the imposition of income tax world. I have, në "(a) The possibility of the success-in expressing the case for this measure would be an intolerable burden, 11 that, this question ful working of the tax should first be should be interpreted not as an Indi-find that argument almost impossible de evarlon is be the subject of a detailed investigation cation that Government is determined to understand. I am not going to dis with the assistance of an expert, pre- to carry it through against all opposi-cuss in detail whether there has been blem in the administration, ferably familiar with the collection of tion, but as an attempt to convert op any such trade depression. 17% k ve the tax in an Eastern country, position which is thought to be this-

tax, whether ***{b}% Wat eel that it would be un-conceived. Finally I want to show

The Hershbeff ##670dfóny's ra- - wise tolimigade urtag of this nature that the proposal vás not brought for

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