56
ourable friend Mr. Chan's views, T would say that in conversation with leading British Accountants, I dis-
difficulties,
cover
numerous
numerous to catalogue here.
too
I would have been more impressed if the Financial Secretary had been able to give us an assurance that the local firms of accountants had been consulted. I remain unmoved in my view that it will be a costly matter both to Government and to the Com- munity, adding burdensome overheads.
In dismissing in a few words the reference to the imposition of Income Tax in Singapore the Financial Secretary says, "I have it good authority that the enforcement of Income Tax was never seriously
ursued."
Dropped in Singapore
on very
I am disappointed the Financial Secretary has not given us the reasons why the Administration in Singapore never really pursued the tax and why very soon after its inception, dropped it.
I am given to understand that of the tax actually collected approxi- mately 76% was borne by the Euro- pean community.
It was
Time
certainly War
a measure, but in spite of that fact, im- portant objections must have existed, information as to which must be available. It is significant the im- position of Income Tax
was soon
dropped in the Straits Settlements.
The Financial Secretary has pointed out that capital invested in plant and equipment cannot be removed from the Colony and goes on to remark that it is a matter of indifference to the Government whether a tax on the income from it is paid by the existing owner or anyone else to whom he has sold his shares. But surely the Financial Secretary has overlooked
the deflationary effects of a general movement to sell out Hongkong in- vestments.
the
The plant and equipment to which the Financial Secretary refers have been purchased from funds provided by the investor. Many of these in- vestors are in a position to transfer their money from one part of world to another and their money happens to have been invested here because of the attractions offered by Hongkong in the way of security and a reasonable and untaxed return on capital.
Investors' Doubts
The imposition of an income tax i will, in the opinion of the business community, raise doubts in the mind of such an investor, who with- ! out giving full consideration to
what the Financial Secretary calls the beauty of income tax, may decide to dispose of his share of the plant and equipment re- ferred to. If he does so he may have to take less than he expected and in turn his forced selling and the forced sales of others will mean recession throughout the share list. There will then follow a heavy reduction in the value of collateral securities and bankers will start to call in their loans.
The Colony will then find itself again in the financial chaos which prevailed during the autumn of 1925, when private investors were faced with huge losses and the Government had to come forward with assistance in the shape of a Trade Loan.
The Financial Secretary quotes the Taxation Committee as being ur animous that an income tax was in principle the best method of raising further funds. I am not satisfied this
is quite a fair statement. As I am given to understand that Commitlce were against Income Tax, but agreed it could be brought in in case of necessity of the Colony itself. I do not believe they visualised it would be suggested as a means of taking money out of the people to be remitted out of the Colony.
Flight of Capital
It appears that the Honourable Financial Secretary does entertain some fears that Capital may be re- moved, for he makes two suggestions that should be adopted to prevent such movement.
The first one is that "No Income Tax should be charged on interest on deposits held by non-residents.”
is
Is not this an admission there some danger of such deposits being removed, and if there is fear of non- residents doing so, why should it not cause residents to do likewise?
Later in his speech the Financial Secretary proposes some special con- cession is to be made to newly established factories. It seems to me this is also an admission of some fear new capital may be prevented from coming here.
To my mind Income Tax is unsuit- ed to the peculiar conditions of Hong- kong which has built up its import- ance as a trading and financial centre on the principle of freedom from Government restrictions upon the in- dividual trader and his financial operations. The confidence thus created is essential to the prosperity of the Colony. There is real danger that a method of taxation ill-adapted to the special position of Hongkong will destroy that confidence and seriously damage a delicate financial structure.
I would repeat again, Sir, it is of vital and paramount importance that the facilities of this port be kept as free and cheap as possible.
Disastrous Effects
The introduction of any measures that may endanger these facilities or become a means of restricting the movement of its Chinese traders will have the most disastrous effects. Trade driven from this Colony to competitors, who are only too anxious to obtain a share of our trade, will be extremely difficult to recover.
I am satisfied that suitable alterna- tives can be found for the object we all have in mind, and I associate my- self with the Honourable Member who represents the Chamber of Commerce in his suggestion, that the Expert Committee now examining the Bill be given wider terms of reference.
There seems to be abroad in some circles a feeling that the British Com- munity is unwilling to shoulder its proper responsibilities. I desire to associate myself with the remarks made by the Hon. Mr. S. H. Dodwell in this regard. There is no re- luctance, as far as I am aware to take our share in the war-time res- ponsibility of the Empire, but I do most strongly feel that the #nancial and commercial interests of the Colony and therefore its future pros- perity will be adversely affected by the introduction of a levy in the form of the proposed Income Tax. (Ap- ['plause).
MR. LI TSE-FONG
"$1,000,000 a Day Leaving The Colony"
EDUCATION PROBLEMS
The Hon. Mr. Li Tse-fong said: Your Excellency,-As I am a com- paratively new member of this Council I have a few observations to make.
I agree
with the Government's policy that there should be as little disturbance as possible with the Colony's current activities and development schemes, and I venture to think that the provisions made for public works extraordinary are by no means extravagant. All works provided for in the estimates for the development of health and education.. that would confer common benefit to the community, should be proceeded with without any avoidable delay. I earnestly hope that in the event of Government being called upon to cut down expenditure in order to balance the Budget. this should not be done at the expense of Health and Educa- tion.
Education Criticised Although the present is not opportune for me to advocate larger appropriation for the extension of these essential services, I feel that in the matter of education I must call Government's attention to the lack of provision for the building of modeľ vernacular primary schools as recom- mended by Mr. Burney in his Report issued on May 27, 1935. In urging Government to give this matter its careful consideration, I will quote the following passage from the Report in regard to primary vernacular educa- tion in the Colony:
"It is a serious weakness in Hong- kong's educational system with result felt through the school career of many of the children that the school in which the primary foundations are laid should be of so poor a quality. This is the more regrettable when it is remembered that for many children education ends at the primary stage. In fact it is evident that the Govern- 'ment's expenditure on Higher (in- cluding Secondary) Education is out of proportion to its expenditure on. Primary Education. On these grounds it is recommended that the Government should assume as soon as possible larger responsibilities in primary education and the best way of doing this would be to build, as a start, two or three large primary schools in the City of Victoria, staff them only with fully trained teachers, inspect them properly and thus make them fit to serve as models for schools conducted by private enterprises. These new schools should be free, an innovation which would not bẹ very costly since any fees charged could only be small.”
Some of the schools conducted by rivate enterprises, I must say, are fine institutions but the general con- ditions of many others are far from satisfactory. The Community are predominantly Chinese, and as tax- payers they have the right to expect hat Government should assume full "esponsibilities in the primary educa- tion of their children. I submit that it is now the general accepted policy of all modern nations to provide at ast the primary education necessary for every citizen as a common benefit and to make it free to all the recipients.
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