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Governor's attitude, but in the meantime, in a semi-official letter to Sir J. Risley (40666/23) Mr. Macnaghten has pointed out that the tax at the current rates claimed by Hong Kong
is payable in January next and that the B.A.T. Co.(China) Ltd., were inclined to the view that unless some very substantial reduction was made in the amount payable under the Ordinance they would be well advised to test the
validity of Section 7 subsection (4) of the Hong Kong
Ordinance.
H.M.Minister, Peking, expresses himself as followe:- (1) In the opinion of H.. Consul General, Shanghai, who acte as Registrar of Companies, the Hong Kong Government have some justification for claiming the annual fee from
the Company, but that the transfer fees as at present levied are unreasonably heavy in the case of private Companies and he supports the contention of the Company that they should not be called upon to pay fees twice
over in respect of shares held by them in their
subsidiary Companies.
Mr. Barton (H.M. Consul General, Shanghai)
obeervee that the question of the annual 4 cents per 100 dollars on paid up capital was raised by the Company in 1919 when a request was made for the reduction of
the fee to reasonable sun on the ground that the
Company was a private one and that it included several eubaidiary Companies. Meeting with no success at the hands of the Hong Kong Government they then announced their intention of testing the legality of the charge.
On the question of the fairness of the fee and
the Governor's view that the fee is levied in lieu of the
Hong
Hong Kong estate and transfer duties from which China Companies are exempt, Mr. Barton quotes Sir H. de Sausmarez who in 1919 held that the only case in which there is or can be any actual exemption is, that of persons domiciled in Hong Kong and holding shares in China Companies and that the fee was intended to represent no more and no less than a composition for transfer fees only. If this view is correct the loss of revenue to the Hong Kong Government on thie account could hardly be large.
On the other hand, although the Governor makes no reference to it, Section 35 of the Ordinance of 1911, as amended by Section 7 (c) of the Ordinance of 1921, in providing for the levy of a local licence fee also at the rate of 4 cents per 100 dollars of paid up capital is very clear on the subject of exemption from both transfer and probate duties. Mr. Barton observes that many Companies which have since come on the Shanghai Register were paying this fee prior to 1916 and that Section 7 (5) of the Ordinence of 1915 makes it clear that the present 4 cents fee is intended, inter alia, to replace this local Register licence fee. This would appear to constitute the Hong Kong Government's best claim to the fee as at present levied and it is difficult to understand why it has never been referred f to.
As regards transfer fees there is nothing to show that the Hong Kong Government has ever attempted to estimate its loss in this respect owing to the exemption of China Companies, but the Stamp Ordinance of 1921 shows that the fee on transfer of shares is
20 cents per 100 dollars for part thereof of the market
value
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