Downing Street,
S.W.1.
10 April 1947.
253
16
307/47.
Dear Gilbert,
Hong Kong Government has recently sent us a query on the income tax legislation which they propose to introduce this year.
Certain firms apparently made exceptional profits during the year ended 31st March 1947. Under Section 19(1) of the draft Ordinance the assessment is normally on the profits of the previous year. In order, however, to avoid assessment on the 1946/7 profits, which were considerable, the firms are in many cases going into voluntary liquidation. Thus, if the firm starts up afresh prior to 31st March 1947, under Section 19(4), it will be assessed on a year's profits from the date it re-commences business; and if it starts up afresh after 31st March 1947 under Section 19 (3) and (5), it will be assessed on the profits for the period 1st April 1947 to 31st March 1948. Hong Kong ask for advice whether this move by such companies can be defeated.
This problem can, of course, only arise in the first year in which Income Tax legislation is introduced in a Colony and even then it would only arise if the year prior to the commencement were an exceptionally good year for companies.
It may be that there is no solution to the problem and the resulting loss may have to be
F. GILBERT, ESQ.
/accepted
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