HONG KONG LEGISLATIVE COUNCIL.
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2. The main object of this Ordinance is to adopt in the case of tobacco manufactured in Hong Kong the principle of taxation at the source. It is on this principle that the duty is collected in Great Britain on
Henceforward, tobacco manufactured there.
therefore, tobacco will no longer be manufactured in bond but there will be a flat rate on the imported raw leaf used in manu- facture. The same rule of a flat rate is introduced in the case of all manufactured tobacco imported, in place of the present system of division into numerous classes according to value for the purposes of taxation.
3. It has proved, in practice, impossible to control adequately the numerous factories, many of them working on a small scale, which receive raw leaf and pay duty only on such of their manufactured products as they declare for local consumption.
4. It has also proved extremely difficult to assign to their proper classes the numerous brands of cigars and cigarettes which are now on the market here.
5. There is also the problem of the cigarette deliberately sold at a loss in order to kill competition or to establish a new brand.
6. There are also frequent alterations in the quality of the goods sold, without a corresponding alteration in the price.
7. Once the manufacturer has to pay duty on his raw material as soon as he imports it or draws it from bond, a system of paying drawbacks on such of his product as he exports must be concurrently introduced, and this will be done by regulations made under section 3 (1) (b) of the principal Ordinance as amended by clause 3 of this Ordinance.
8. The amount of drawback to be returned on export is calculated on the average amount of raw material which has been consumed in making the various kinds of manufactured tobacco.
9. Opportunity has also been taken to alter some parts of the original Ordinance, where experience has proved that the existing wording was not sufficiently clear, or required amendment.
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10. Clause 3 of this Ordinance amends section 3 (1) (b) of the principal Ordinance by substituting the word "drawback" for the word "rebates," because the former is the term commonly used.
Clause 4 makes it incumbent upon an exporter claiming a drawback on exported tobacco to sign a declaration to the effect that the tobacco in respect of which drawback is being claimed has been actually shipped for export and is not intended to be relanded in the Colony, and stating the name of the person who, upon exportation, will be entitled to receive the drawback thereon.
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