CO129-582-7 Taxation 6-6-1939 - 5-2-1940 — Page 168

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preserving the Colony as a haven for the "Refugee.'

The rates to be imposed should not therefore be

sufficiently high to drive away this capital.

(4) Administration of income tax would not be

possible at an economic cost; a large and expert

But the European staff would have to be imported.

Committee point out that in Ceylon the cost has been

about 4 per cent of the yield, and that in any case it

would diminish after the initial years.

(5) Economic and industrial development

(particularly of small factories as yet in their infancy)

would be seriously affected. But the Committee suggest

that factories could be compensated in other ways e.g. by the English industrial de-rating system or by

a general reduction in the assessment. Factories might

well prefer an income tax, which would affect their

profits only, to an increase in assessed rates which

would be payable even when no profits could be shown.

The Committee suggest that, having regard to

the necessary minimum cost of an income tax, it would

be uneconomic to impose it at a very low rate and think

that it would probably be found that the maximum rate

On its first should eventually be púteat 10 per cent.

institution, however, the rate should be 5 per cent, in

which case the annual yield might be something in the

nature of

$5mills This being so the Committee suggests that

the imposition of income tax might be followed by

remissions n other forms of taxes.

The Committee's conclusion is that the

advantages of an efficiently administered income tax

over other forms are overwhelming from the point of view

of equity but the whole question turns on the possibility

of