189
190
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(h) Class VIII. Death Duties: A well-established Estate Duty exists in the Colony, We have considered its extension beyond the present limits and the possibility of an increase in the rates and of the introduction of Legacy and Succession duties.
(i) Class IX. Income Tax: We have considered at length the possibility of the introduction of an Income Tax or of various analogous Profits Taxes into the Colony.
(1) Class X. Miscellaneous Revenue: We have considered whether increased revenue could be derived from public utilities-transport, electricity, gas, telephones, etc. having due regard to the possibility of the public being involved in increased charges. We have also discussed the possibility of securing revenue from the introduction of other monopolies.
Chapter VI.
Possible Increases or New Sources of Taxation.
We wish to preface the particular conclusions arrived at in this chapter with certain general considerations which have guided cur discussions:-
(a) We consider it inadvisable to add to the existing forms of taxation a multiplicity of new forms, which must be irritating and harmful to the freedom of trade and business which is so important to the Colony. Our recommendations accordingly advise either increases in the present forms of taxation or the introduction of new forms only when their advantages, whether by way of ease of collection, equity of incidence or probable yield, seemed to outweigh those general objections.
(b) We assume, from the very fact that a Committee has been appointed for this purpose, that the additional revenue, if and when it is needed, would be of substantial amount, and that we should accordingly direct our minds to indicating whence, if necessary, really substantial revenue could be obtained.
(c) We further assumed that the appointment of this Committee indicated an entirely proper desire to make plans in advance, not to wait for an actual immediate need to arise, and that we could, therefore, justifiably include in the scope of our consideration taxes whose imposition would require a preparatory period of some length and need not consider only those which could produce results at short notice.
A. Suggestions Considered and Rejected.
On the above basis we propose first to set out certain proposals for new imposts or the increase of existing taxes which we have considered and rejected; then to list certain increases which we do recommend and which, although individually small, may aggregate to a considerable sum; and finally to list certain measures any one of which appears to us capable of producing the substantial revenue which we assume was in mind.
Customs Duties.
(a) The question of a general customs tariff was considered and rejected as being, in view of the peculiar economic and commercial situation of the Colony, impracticable. We also rejected any increase in the tobacco duties, the largest item in this group, which bear mainly on the poorer classes. Experiments have already been made with an ad valorem duty on cigarettes, but we do not believe that any practical benefit could be obtained from a further application of this principle to the liquor and tobacco duties generally. Nor do we recommend any attempt to include other semi-luxury articles of consumption (among which radio sets have been suggested) in the present
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system of import duties. We were informed that the possibility of a tax on salt had been considered previously, largely as a measure to assist the Chinese Salt Administration in controlling smuggling. The conclusion then reached, with which we concur, was that it was not worth while as a revenue measure, having regard to the cost of collection and the nature of its incidence on the poorer classes of the Colony.
Surcharge on Rates.
(b) We considered the charging of a "super" rate on domestic premises of more than a certain annual value, as a method of directing an increase of taxation towards the wealthier members of the community. Such a scheme would have the theoretical advantage of representing an approximate income tax, on the assumption that the value of a man's residence varies with his income. This assumption, however, is only very roughly true, since wealthy persons frequently live in modest dwellings. An obvious method of evasion by means of the sub-division of dwelling houses presents a further dis- advantage. We considered approximate figures and finally agreed that, in view of the small addition to revenue likely to be secured in practice, the imposition was not worth the general irritation it would cause.
Internal Letter Rate.
(c) We considered the question of raising the internal letter rate from 4 cents to 5 cents. The Postmaster General submitted a memorandum on the subject which caused us to reject this possibility, though we believe that an attempt to increase the already considerable profit shewn by the Post Office is not, in general, undesirable.
Marine Surveying Fees.
(d) We observed that the Government Marine Surveyor's fees were low as compared with the fees for similar services charged by private firms. Since the former, however, are based on Board of Trade Standards, we cannot advise any adjustment locally,
Motor Licences.
(e) We are unable to recommend an increase in the taxation of motor vehicles generally. The purchase of motor-cars should not be impeded. The appropriate increase in this sphere, if increase be indicated, should rest on motor spirit rather than on the vehicle: the effect of this on the owner being a more economical use of the vehicle which he is not discouraged from buying.
Death Duties.
(f) Any further revenue under this head should be obtained by an increase in the rates of Estate Duty rather than by the introduction of other methods of taxing property on death, e.g. Legacy or Succession Duties; but we consider the present rates, which were fairly recently increased to a maximum of 20%, high enough in the circumstances of Hong Kong, where the much higher rates prevailing in, e.g., the United Kingdom would add greatly to the incentive to evasion.
Business Licences.
(g) A general system of business licences was rejected because of the difficulties of collection, the hindrance it would present to freedom of trade and the unequal incidence of any flat-rate imposition of that kind.
Passenger Landing Fee.
passenger landing fee would bring in an immediate revenue but (h) A was rejected because it would be an irritation to visitors and tourists and would curtail the freedom of movement which is at present one of the attractions of the port.
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