CO129-615-2 Income tax 10-3-1947 - 6-2-1948 — Page 67

HONG KONG LEGISLATIVE COUNCIL

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Under the Bill now before us the Commissioner is given very considerable powers. Mr. Pudney, who has also read Adam Smith, has the specific intention of exercising those powers wherever possible with an eye on the spirit rather than the letter of the law, reasonably, and without undue interference with the legitimate privacies of private and commercial life; and he will depart from that policy only where he has good reason to suspect an attempt at evasion.

Now, some smaller business concerns have the fear that their whole traditional system of accounting will be overturned and that something else compulsory will be put in its place, at expense to themselves and confusion to their enterprises. Quite categorically, this is not Government's intention, nor is it a probable result. On the Commissioner's staff there will be officers expert in drawing from Chinese accounts the information required under this Bill for the purpose of tax.

These officers have been specially selected and a number of them were in the 1941 Department and on the basis of the experience they had then they are confident that in very few cases indeed will any taxpayer be required to recast his accounts; certainly he will not be lightly asked to do so.

And that brings me to the question of evasion. There will be some evasion, and it would be stupid to seek to deny it. The question is, how much evasion? Since the whole matter both now and in the future will be largely guess-work, and is not susceptible of proof, all I can do here is to state that Government has most carefully con- sidered the problem of potential evasion. Government has reviewed the staff required, the staff available or shortly to be available, and in the considered opinion of Government it will not be nearly so easy to attempt and succeed in evasion as seems to be supposed in some quarters. Moreover, it will become progressively more difficult. The world wide experience of tax gatherers is that successful concealment of profits over an extended period is by no means an easy matter, and we do not expect to find any different result in Hong Kong. in Hong Kong also we may take comfort from the experience of 1941. So far as we know, and as my Honourable Friend Mr. Lo has pointed out, there was no materially successful evasion in 1941; and where there were suspicions the Government was confident that the corrective measures planned for the following year would have satisfactory results. It would not have been perfect,-no tax is-but it was reasonably certain that there would be no material evasion, and the Government sees no reason to suppose that the same situation which obtained in 1941 will not obtain again this year.

And

And lastly, there is the disclosure of commercial secrets which is so much contrary to the traditions of Chinese or any other business. Honourable Members will have seen the provisions of Section 4 of the Bill and will have observed the obligation of stringent secrecy laid upon the personnel of the Taxation Department. I assure Council that these provisions are there to be obeyed and will be enforced to the best of Government's ability to the letter.

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