Care
HONG KONG LEGISLATIVE COUNCIL.
185
The honourable the senior Chinese member has made comments on question of administration which form the main basis of his object in principle and which I therefore want to comment upon in some detail. First, with all respect, I do not believe in this mystery of Chinese accounting; nothing I have heard of it suggests that it is very different from the system adopted by small businesses in Europe as distinct from the complicated accountancy of big European firms; and the adjustment of such accounts for income tax is common routine. Secondly, I cannot follow him in his belief that humanity is divided into Chinese and the rest. The argument that income tax has never been successfully applied to Chinese is appealing, but what are the facts? As to China itself, it is surely obvious that the administration, for reasons I need not elaborate, is too weak to enforce any such tax; but there are other laws which are not enforced in China which we still make a fair show of enforcing here. As to Singapore, I have it on very good authority that the enforcement of income tax was never really seriously pursued. Lastly Mr. Chau has not mentioned one place where a large community of Chinese does, I am reliably informed, pay income tax and where the authorities have developed what they regard as a satisfactory system of examining Chinese accounts, that is the Netherlands East Indies.
There are a good many more detailed points I would like to take up with Mr. Chau if time permitted, I will only say that I am very hopeful that means could be devised of collecting the tax efficiently without prying into all the family secrets which he suggests the Chinese community would so much resent.
The last main group of objections to income tax are of a kind which Government ought to weigh very seriously, if they are in fact true: i.e. that the imposition of an income tax will drive business and capital away from the Colony. I may say that before the proposal was brought forward in this Council at all Government consulted certain leading business men and was assured that an income tax at the comparatively low rate proposed would not have any such effect. I still believe that that advice was entirely sound. Again I would like to remind honourable members that this is a tax on income and not a tax on invested capital as such or on the conduct of business as such. The imposition of income tax will impose no hindrance to the setting up of a business here, and if that business is not successful it will pay no tax.
If it is successful I do not think that the man who started it will go away because he finds that he has to pay a proportion of his profits to Government. Again, that is not true of any alternative tax. Increased rates, a sales tax, higher charges for electricity and telephones would all be burdens on a new business from its very commencement and whether or not it was profitable. I am in fact amazed that it should be suggested almost in the same breath that Income Tax will drive away new factories and that some factories should be charged more for their electric power.
Hong Kong has had and still has certain advantages to offer to business and manufacture, i.e. security, almost unique harbour
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