CO129-595-3 Proposed introduction of income tax 12-12-1946 - 26-1-1947 — Page 24

assessed on his aggregate income.

Otherwise he pays tax on each source

of income at the standard rate of tax. .

It is worth explaining that

one of the real difficulties in Hong

Kong, which has in the past mitigated

against Income Tax, has been the un-

willingness of the Chinese to disclose

all their financial affairs to other

Chinese,

whether in the administration

or not. The Ordinance as now drafted

will give a positive encouragement to the

taxpayer her to opt for a normal besis

of assessment. If the majority do, then

the transition to a normal Income Tax will

be relatively painless.

The main disadvantages of the tax

now proposed is that it is not possible to

levy a surtax on the higher incomes. The

reason for this is that surtax is essentially

based on individual incomes and until general

individual assessment is in force the surtax

would fall only on salaried persons and

those choosing a personal assessment. This

at the Same Times would be both inequitable and defeat the

object of the provisions permitting taxpayers

to choose personal assessment, since they

would of course only lose by doing so. To

some extent this disadvantage can be got over

A

by stepping up the standard rate of tax as

high as possible and increasing the allowances

on individuals. A proper surtax would,

however, have to await the introduction of

ordinary Income Tax, and we are satisfied

that the present compromise is the only

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/practical