1939-11-15 — Page 11

THE CHINA MAIL, NOVEMBER 15, 1938

A CHINESE ON THE INCOME TAX CONTROVERSY

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POSSIBILITY OF EVASION

Sir, It is my great pleasure to Chinese merchants must be kept in support unhesitatingly the most bril-English, but in Hong Kong, the Fin- liant speech made by the Hon. Fin- | ancial Secretary intimated in his ancial Secretary at the meeting of speech that no such intention ever the Legislative Council on Thurs- existed among official minds as to the day last. Like many others who compulsory keeping of accounts in have given expression of their views | English. through the columns of your paper during the past few weeks, may I The possibility of evasion was also make a few remarks on the imposi- referred to and to this the Financial tion of Income Tax in Hong Kong?

Secretary gave a very able answer, pointing out that, although more methods of evasion may be invented, more methods of detection will be business and individual secrets would tion, direct or indirect, evasion is in- developed. In every system of taxa- seriously jeopardize the future busi-evitable but, even then, it affects only ness of taxpayers because the major-the probable yield and it is unreason- ity of Chinese merchants do not like able to say that, because there is the others to know of their private busi-

possibility of evasion, Income Tax ness affairs. This is no doubt the

cannot be introduced. Even if

al- usual psychology of most business

ternative forms of taxation are adopt- men not only in Hong Kong but ined, none, I believe, can safely claim other countries also because, if the that evasion could be made impossi-

DISCLOSURE OF SECRETS. It has been said that, if Income Tax is introduced, the disclosure of

ble.

MOVEMENT OF CAPITAL

From an

business affairs of one firm are known to others, very serious competition would ensue. But what I fail to un- derstand is how the imposition of It has been said that the introduc- Income Tax would or could disclose tion of Income Tax would frighten the business affairs of one firm to capital away from the Colony. The the knowledge and advantage. of truth of this argument can only be others since all information concern-accepted subject to certain important ing each taxpayer is accessable only qualifications.

economical to the taxation officials in charge. It would be true if the contention were based on the assumption that taxation officials are gossipers and therefore they would tell one taxpayer what tax is paid by another. That is the only possible assumption on which the contention is based but it does not justify the argument that Income Tax should not be imposed.

Income

point of view, the tendency in the supply of capital is not caused by the mere imposition of Income Tax but is principally caused by too high a rate. Moreover, since tax is charged on income only and not on capital levy, it is difficult to see how the im- position of tax on income would tend to remove capital from the Colony. In Manila, where there is Tax and in French-Indo-China, where there is a very high business and personal tax, how much capital from these two places was removed to Hong Kong during the time taxes were introduced there? I there- fore believe that capital can only be driven away and accumulation of capital can only be discouraged when the rate of Income Tax is too high but not by the mere imposition of

ALTERNATIVE FORMS OF

INNER AND OUTER COUNTERS ..As one who went through the various speeches made at the Coun- cil debate carefully, I fail to appre- ciate the actual meaning involved in the statement made by one of the Hon. Unofficial members that an official invasion of the inner counter means to a Chinese business man a great deal more than the disclosure of his business secrets. I cannot see what secret exists in the inner coun- | Income Tax itself. ter of a business; at least there is none in my business. The inner coun- ter is equivalent to the chief cashier who keeps the firm's total receipts and payments while the outer coun- ter is a sub-cashier who takes charge of daily cash sales only. This tradi- tional procedure has no other essen- tial difference than that of other countries. Personally, I have no se cret about my own inner counter. Since my accounts are written up to date, my cash is not missing and everything is in perfect

were

order.

If

TAXATION

when

power of

If other alternatives are instituted, such as sales tax, increase of rates, increase of amusement tax etc., these are open to more serious objections than the imposition of Income Tax. A tax on sales would mean a rise in prices and the poor must be made to pay just as much as the rich. The demand for commodities will be re- duced and the purchasing the people as a whole will decrease. An increase in rates on buildings sales tax is imposed in lieu of In-

means an increase of rent because come Tax, there is no doubt that the incidence of such a tax would ultima- sales records of businesses will betely be shifted on the shoulders of inspected and this would then be an tenants, rich and

poor alike.

No official invasion of the outer counter other form of taxation that could be Instead of the inner counter affecting, more equitable than the imposition in my opinion, the psychological of Income Tax and, furthermore, one minds of the people just as much as large tax is to be preferred to sever- the invasion of the inner counter in- al small taxes, the collection of which sofar as Income Tax is concerned.

involves much time and expense. CHINESE ACCOUNTS.

INCOME TAX ADMINISTRATION Objections

raised on the

Many genuine and straight-forward ground that if Income Tax is intro- views have already been expressed duced, great difficulty will be ex- but, so far, no critic has denied that perienced by the Chinese in incurring Income Tax is the fairest form of further costs for keeping proper ac-

taxation. Their arguments have been counts and, because of the mysterious

(Continued on Page 14) methods of Chinese accounting, con- siderable difficulty will be experienced by the Government in its adminstra- tion. Although there is some ele- mentary truth in this contention, I would say that there is nothing pecu- liar about Chinese books, In fact, I learned English bookkeeping for few months and I found that Chinese

LONDON, TO-DAY. books contain just as much informa-

FOR THE FIRST TIME IN tion as those kept under the double" entry system, the only difference MONTH, THE BRITISH NAVY HAS being that the latter is kept on a LOST A SHIP THROUGH ENEMY purely cash basis while the former ACTION. SHE IS A deals with accounts receivable and WHOSE NAME HAS payable in addition to cash transac- BEEN REVEALED, WHICH STRUCK tions. Chinese bookkeeping may be A GERMAN MINE OFF DEAL.

She remained floating for some sold unsystematic but not mysterious and, besides, there is an increasing time, but sank after being picked up number of schools in Hong Kong for tow by a tug,

In this connection, it is noted that coaching Chinese in new methods of bookkeeping through the medium of the British Navy has 200 destroyers. Chinese. In Manila, all accounts of-Reuter.

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