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10
appointed in 1938 expressed the view that in respect of Income Tax it would probably be found that the maximum rate should eventually be put at 10%”.
(iii) In order to avoid unnecessary expense and inconvenience to indivi- duals and firms who keep accounts in the Chinese language. Governinent should make it clear that the use of either the English or the Chinese language in the Returns furnishable under the provisions of a War Revenue Ordinance will be equally acceptable.
(iv) Any staff additional to the present establishment which is required for the administration of a War Revenue Ordinance should be engaged on a temporary basis so as not to add to the Colony's pensions commit-
ment.
3. Although it may be outside the scope of our terms of reference, we desire to place on record our opinion that the question whether substantial extra revenue for local needs, as opposed to temporary war needs, is actually necessary-vide qualification (a) of the Taxation Committee's report quoted below cannot be answered until it has been ascertained whether the Government of the Colony is functioning on the most economical basis commensurate with efficiency. We view with much concern the continuous rise in the cost of Government, a rise which the Colony's pensions commitment is likely to accelerate more rapidly in the future than in the past. We view with still more concern the fact that the present heavy expenditure is insuflicient to enable Government to meet its full responsibilities in the matter of public health, education and social services generally, for which purposes more money is likely to be wanted in the near future. Before fresh taxa- tion is imposed to meet this need, we recommend that a Commission (preferably a Royal Commission) he set up to investigate the whole organization of civil govern- ment in this Colony with a view to ascertaining whether it is possible to effect economies which would permit of a substantial increase in the programme of social services without undue increase of taxation,
4. If, after such a Commission. increased taxation is required and Income Tax or the methods of taxation advocated as a war measure in this Report are proposed, we would invite attention to the qualifications attached to the conclu- sions in respect of Income Tax arrived at by the Taxation Committee appointed in 1938. These qualifications, with which we express general agreement, were :—
(a) "We must not be taken as expressing the opinion that such substantial extra revenue is actually necessary; in so far as more revenue is needed owing to the growth of the Colony that very growth is likely automa- tically to increase the revenue, while it is outside our province to consider how far it may be needed to finance new or improved services".
C
(b) 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 collection of the tax in an Eastern
country
(c) The imposition of the tax involves a new departure in fiscal policy. We assume that it would not be passed through Council by the use of the official majority and that unofficial members of Council will expect to receive, before agreeing to the imposition, some indication of the heads of expenditure to which its yield will be applied ".
(d)
(e)
"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 "'.
"The imposition of Income Tax should to some extent be compensated
for by the remission of other forms of laxation".
In conclusion we should like to express our indebtedness to Mr. S. Caine
1 whose judgment and experience were of invaluable assistance in our deliberations
11
and to Mr. R. R. Todd who as Secretary to the Committee has kept full minutes of our meetings and who is largely responsible for the manner in which our Report is presented.
14th February, 1940.
(Signed) 0. G. ALABASTER (Chairman),
II. R. BUTTERS.
STANLEY H. DODWELL.
M. K. Lo
LEO D'ALMADA E Castro, JNR.
(subject to the attached Reservation)
LI THE-FONG
W. N. T. TAM.
V. M. GRAYBURN.
D. J. SLOSS.
DAVID F. LANDALE.
R. ROBERTSON,
LAWRENCE KADOORIE
(subject to the attached Reservation)
E. M. BRYDEN.
NG CHAK-WA.
T. BLACK
(subject to the attached Reservation)
Reservation by the Honourable Mr. Leo D'Almada e Castro, Jnr.
It is not without some misgiving that I am a signatory to this Report. Having been convinced that a full income tax would have endangered the Colony's prosperity, wherefore, in common with other Unofficial Members of the Legislative Council, I opposed its introduction, I am doubtful whether the taxes now proposed will not have a somewhat similar effect, at least in so far as they will be a deterrent to the introduction of fresh capital into Hong Kong.
14th February, 1940.
(S.) LEO D'ALMADA E CASTRO, Jnr.
Reservation by Mr. Lawrence Kadoorie,
BUSINESS PROFITS TAX.
While recognizing the force of the argument that on grounds of equity such
a tax must be imposed if there is to be a Corporation Profits Tax", it still remains,
in my opinion, a tax of such inquisitorial effect and of such widespread and complex application and difficulty of administration that it should be left out of the Bill.
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