CO129-586-8 War Taxation 2-2-1940 - 11-5-1940 — Page 147

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(7) Clause 16(e). The deduction for interest should be restricted to interest payable on capital employed in acquiring the income - see the Model Ordinance Clause 10 (1)(a). The fact that interest received is not chargeable to tax as such gives great opportunities for evasion; see the covering letter.

(8) Clause 19. Where this Clause is brought into operation there will apparently be two assessments, one on the resident

be two assessmentocht operationent ? this wed and in his own capacity as a trader and one as agent for the non-resident. as much income liable at the lower rates of tax under Clause 14 and a corresponding reduction in the amount chargeable at the maximum rate.

There will therefore be twice Guest pupils.

on him in his capacity a curses in which

(9) Clause 22. There is no provision corresponding to Clause 27(4) and (5) of the Model Ordinance which provide

respectively that (1) a non-resident shall not be chargeable in the name of a broker or general commission agent, not being an authorised person carrying on the regular agency of the non-resident, in respect of profits arising from sales or transactions carried out through such a broker or agent, (Sub-clause (4)), and (2) that profits arising to a non-resident from transactions with other non-residents are not charged to Income Tax merely because the transactions are carried out through an agent in the Colony, (Sub-clause (5) ).

(10) Clause 23(1). This Clause does not fit well into the general scheme of the tax. Is it intended that there should be included in the "total investment income" income which is liable to tax in the United Kingdom or some other part of the British Empire? Secondly, does Clause 26 operate to exclude from the "total investment income" dividends of a company which pays Hong Kong tax; it is not clear whether Clause 23 prevails over Clause 26 or vice versa.

exceeded $100,000 Time Card be manney

It is nowhere laid down that tax in respect of a dividend shall be deemed to have been paid on behalf of the recipient. A life assurance company which receives dividends out of a fund which has borne Hong Kong tax will not be able to claim that the tax referable to the dividend shall be set off against its own liability as calculated under Clause 23(1); nor will it be able to claim repayment if the Clause 23 liability is less than the tax borne on the dividends.

Example. A life assurance company has a Hong Kong dividend of $45,000, which has in effect borne. 85,000 tax (for to pay this dividend requires a fund of $50,000 with tax at .10%).

Ibs Clause 23 liability is $4,000. Its real burden of tax under the Bill is $9,000 whereas it ought to bear only $4,000.

(11) Clause 32. In view of the existence of Clause 31,

it seems that this Clause should not apply to partnerships; but as drafted it does so apply, since the expression "body of persons" is defined in Clause 2 as including partnerships.

(12) Clause 36(1). This Clause is taken from the Indian Income Tax law, where "previous year" is defined and has a very technical meaning. The present Bill uses a different terminology ("year preceding the year of assessment" Clauses 10 and 18), and if a clause is required which has the effect of the Indian section it should be drafted in terms which harmonise with the terminology used generally in the Bill.

(13)

see

Clause 39(1). It seems preferable that the appeal period

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