CO129-582-7 Taxation 6-6-1939 - 5-2-1940 — Page 82

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HONG KONG LEGISLATIVE COUNCIL.

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this Council, the late Mr. Lau Chu Pak, wrote in to Government a strong memorandum against it. My Senior colleague on this Council, on the 10th November, 1938, in anticipation of the appointment and report of the Taxation Committee, expressed himself strongly against it.

As a member of the Taxation Committee which reported to Your Excellency on the 5th April, 1939, I myself sent in to the Committee a memorandum setting out in detail my cwn objections. Some of the grave doubts which are widely felt as to the possibility of the successful administration of an income tax in the Colony were sum- marised in the Taxation Committee's report, which include the following:-

"3. The migratory nature of the Colony's population, and the extremely mixed taxable community, with greatly differing standards of living, make Hong Kong unsuited to the tax generally.

4. Many benefits are still to be derived from preserving the Colony as a haven for "refugee" capital. The Colony's pros- perity depends to a large extent on the fact that it is the entrepot of China, a free port, without income tax and without excessive taxation. An unwise fiscal imposition may well upset this precarious prosperity."

"9. Economic and industrial development-particularly of small factories as yet in their infancy-would be seriously affected."

The Committee, whilst recommending the introduction of income tax in a certain eventuality "if it be considered that the tax is capable of successful administration in the Colony", felt it necessary to qualify this recommendation in five ways, specified in the report, from which I merely quote two:-

"(a) The possibility of the successful working of the tax should first be the subject of a detailed investigation with the assistance of an expert, preferably familiar with the collec- tion of the tax in an Eastern country.

"(b) We feel that it would be unwise to impose a tax of this nature until a substantial body of opinion in the Colony believes that the tax can be levied fairly and efficiently."

Should some of the misgivings regarding this proposal, which are indicated in the Taxation Committee's report, prove to be true, then the Colony might well suffer a setback from which it might take her a very long time to recover. At all events it is difficult to imagine a set of circumstances more unpropitious than that now obtaining for trying out an extremely controversial fiscal experiment, with its dangerous potentialities. The Chinese in the Colony, who constitute some 97% of the population, have, for over two years, been going through a severe financial strain in order to render badly needed