HONG KONG LEGISLATIVE COUNCIL.
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kind of manufactured tobacco in question, and as a result there are four different classes of cigars, four classes of cigarettes and four classes of pipe tobacco, all bearing different duties. That system also involves provisions for the manufacture of tobacco in bond. The object of this Bill is to change the system of taxation altogether and to tax tobacco at the source; in other words, to tax tobacco as it comes into the Colony, whether in raw form or manufactured form. There are various reasons for altering the system of taxation. One is that the system which the Bill will introduce is the one followed in Great Britain. Another is, it has been found very difficult, in fact almost impossible, to control the large number of very small factories where tobacco is manu- factured. Nothing but constant and very meticulous supervision would enable a proper control to be kept of these factories and the collection of the proper duty. Then again, it is found very difficult to assign any particular kind of manufactured tobacco, whether cigarette or cigar or some other kind, to its proper class in the scale of taxation. Sometimes it is very difficult to say on which side of the line any particular brand falls. Then again, another difficulty which has given rise to a good deal of misunder- standing in the Colony is the difficulty of the cigarette sold deliberately at a low price, and very often at a loss, in order to kill competition or to establish a new brand. The Government are not concerned in any way with preventing such a practice or interfering in any way with competition of that kind. Some people seem to have imagined that the Government by this Bill were endeavouring to check that practice, but that is no concern of the Government. The Government, however, is concerned from the revenue point of view with that practice if the present system of taxation continues. Tobacco, of course, ought to pay duty according to its grade. Where the scale of duty depends on the value of the tobacco, more valuable tobacco ought to pay a higher tax and less valuable tobacco ought to pay a lower tax. When, however, the dealer sells a more valuable tobacco at a lower price he pays duty at a lower rate and consequently the revenue suffers. Again, the charging of a lower price for higher value tobacco at short notice or no notice at all, affects appreciably the estimates of tobacco revenue, and it is difficult sometimes to estimate what the revenue will be if the duty is liable to variation at the will of manufacturers who deliberately, and no doubt quite properly, under-sell their goods for their own special reasons.
The new duties are contained in clause 7 of the Bill. It is no part of the policy of the Bill to increase the duties on tobacco, though, of course, inevitably there will be individual variations in the incidence of the tax. It will be seen that raw tobacco will be charged at the same rate throughout; it varies according to the amount of moisture in the tobacco and according to whether the tobacco is stripped or unstrippod, but practically speaking there is one flat rate for all raw tobacco. In the case of manufactured
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