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Granting that this statement is correct, it does not alter the fact that the estimated surplus of this Colony's assets over its liabilities, at the end of March 1941 will be well over $17,- 000,000 although it may not consist entirely of cash.
According to the financial state- ment published by Government on February 5, 1941, the Colony's actual surplus at the end of October, 1940, was more than $21,000,000 of which a sum of over $18,000,000 was classi- fied as cash and advances. This re- presents a very high ratio in relation to the amount of revenue from ordinary sources.
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If this Colony were a corporation I would certainly congratulate those in charge of its affairs on its very strong financial position. But as Government it is open to criticism. It may be criticised that either it has failed to carry out and develop fully its social functions or it has taken more revenue than was necessary from the people by way of taxation. Medieval Practice
I submit, Sir, that this practice of keeping a surplus was a method adopted by Governments during the Middle Ages and has long been con- sidered as bad financial policy. It is well established in practical financial administration that surplus financing encourages extravagance and that there is no necessity whatever for a state to keep a surplus.
I mention this not because I wish to suggest that the estimated deficit for the next financial year should be met by drawing on this surplus as I hope that there will be no necessity to do so. But I believe that this policy of accumulating surplus is fundamentally wrong.
I admit that the existence of a large surplus gives a certain degree of convenience to the administration because it has at its disposal, what one may call, a special fund from which it can draw for the purpose of financing public works. However, I venture to say that this practice of drawing upon the surplus to finance public works does not conduce to good financial organisation and careful budgeting. With a surplus to fall back on there is a possible temptation on the part of the administration in presenting its annual budget to the legislature to withhold a complete statement of its needs for fear that its estimates may be cut down. Another possible abuse of the use of the surplus is that the administration may be spending public money first before coming to the legislative body for approval.
Use of Surplus Urged
It may be said in favour of this policy that the object of maintaining a surplus is to have a reserve in case of emergency. If that was the inten- tion, I think the present moment is the proper time to make use of such surplus. A portion of it may be set aside for the cost of the proposed building of two ships to be presented to the Admiralty and War Depart- ment and the remainder can be used for carrying on defensive works in the Colony. If Government were to agree to this course, there would be. no deficit in next year's budget and no necessity to curtail its Social Services. Indeed all Social Services can be further expanded with revenue coming in from ordinary sources.
It is evident from the operation of the War Revenue Ordinance that the taxable ability of the community is extremely good as well as extremely flexible. I submit, Sir, that this ability and flexibility of our taxation system constitute the real reserve of our financial power which has stood the test of time remarkably well.
I will now pass on to make some general remarks on the estimates for the next financial year. The figures in the estimates have been carefully considered and closely scrutinised by the Select Committee of this Council and I will confine my remarks to the general policy in connection with them.
Before I offer my views I wish to state that I am in general agreement with the remarks made by my Senior Chinese Colleague in regard to the War Revenue Ordinance, and Death Duties and his criticism of the working of the Food Control Depart- ment and the Immigration Depart- ment.
Increased Taxation
Among the proposals for increased taxation for the purpose of raising further revenue, the Financial Secret- ary has suggested three alternatives which are briefly as follows:
(1) To increase the existing rates under the present War Revenue Ordinance.
(2) To amend the present War Revenue Ordinance.
(3) To impose a "proper" Income Tax.
I do not intend to deal with these suggestions to-day but I wish to state that, as far as revenue is concerned, the operation of the War Revenue Ordinance appears to be highly satis- factory.
I gather from the Financial Secret- ary that he is quite satisfied with the yield of the Property Tax, the Salaries Tax and the Corporation Tax. Indeed, Corporation Tax alone is expected to bring in no less than $5,000,000 against an estimated return of $6,000,000 from the four taxes imposed by the War Revenue. Ordin- ance. As far as can see the Finan- cial Secretary's main disappointment is in connection with the smallness of the return from Profit Tax, which is expected to produce a revenue of $900,000 only. It should, however, be remembered that the War Revenue Ordinance has only been in operation for less than a year and that a tax of this nature generally takes some time before it can be effective.
Amendment as Remedy
It is quite true that businesses include all non-corporation firms and professional men who do not pay Salaries Tax, but it must not be overlooked that the majority of these non-corporation firms consist mainly of small shopkeepers whose capital, as a rule, is small. If there were obvious evasion and unfair incidence, I venture to think that the remedy is to amend the War Revenue Ordin-
ance.
His Excellency has already recon- stituted the War Revenue Committee in order that the Committee may re- examine and advise Government on the existing measures of war taxation in the light of the Colony's present financial position and the actual receipts from the four taxes imposed by the War Revenue Ordinance. It is the task of this Committee to find some practical solution and to give
Government advice as to the best means of raising revenue to meet War expenditure under prevailing conditions. I will therefore abstain from making further comments.
With regard to the provisions for the daily collection of nightsoil to be undertaken by Government I under- stand that such provisions would not be carried out if there were no sign of any improvement in the Colony's finance. I do not think that it is quite correct to say that the Urban Council, of which I am a member, has definitely suggested to Govern- ment to put an increase of one per cent on rates in order to meet expenditures on this undertaking. As a matter of fact when this matter was brought up for consideration, the question of finance had not been discussed.
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Unfair Burden
consider that it is not fair to place the entire burden property owners without re- gard to the fact that some of have water flush
the tenements systems. I wish to point out that this responsibility of daily collection of nightsoil, if undertaken by Gov- ernment, is a service rendered to a particular class of the community and that class should pay for it.
My Chinese colleague, the Hon. Mr Tam has spoken very fully on this subject. While I agree that the scheme sponsored by the Urban Council is an improvement, I feel that unless Government is in a posi- tion to carry out that scheme in full, the alternative method mentioned by Mr Tam in dealing with the existing system appears to be a practical one.
In the matter of education I wel- come the provision for a new sub- sidy code for vernacular schools which makes generous provisions for subsidies to schools on the basis of
approved expenditures on salaries of teachers and rent of school buildings.
As a member of the Board of Education I firmly believe that in the educational system of this Colony it is Chinese primary educa- tion which urgently needs develop- ment. At the present time the deve- lopment of Chinese primary education is left almost entirely in the hands of private enterprises and I do not think that a satisfactory system can be achieved without Government taking a leading part in its develop- ment. I wish therefore to urge Government that as soon as the financial position permits, it should proceed with the programme for the development of Chinese primary
education.
Education Programme
The programme has been carefully considered by the Board of Education and submitted to Government by the Director of Education with the full and unanimous support of its mem- bers. I venture to think that this programme is not an extravagant one and does not call for heavy expendi- ture which will be spread over a number of years.
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I consider that, of all expenditures on Social Services, expenditure Chinese primary education should receive first consideration. If we were able to prevent, by providing proper education, a large number of young people from falling into the criminal class, it would relieve this
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