CO129-615-2 Income tax 10-3-1947 - 6-2-1948 — Page 69

HONG KONG LEGISLATIVE COUNCIL

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the greatest amount of revenue will be derived. If it were to be replaced completely by some form of business licence, the position would be very different and the licence fee would have to be fixed at quite a high figure in order to produce the necessary revenue. Obviously, the smaller businesses could not afford to pay a high licence fee of this kind and it would be necessary to create administrative machinery to consider hundreds-or more probably, thousands-of applications on their merits with a view to scaling down the fee to an appropriate figure to meet the circumstances of each individual case. This would be a formidable task. Considerable extra staff would be required and whether each case was considered on its merits or the alternative and equally difficult method was adopted of fixing a graduated scale of fees and attempting to classify the various businesses accordingly, the results would I fear be far from satisfactory. How much simpler it will be to tax these concerns according to their actual profits as is now proposed! And how much more equitable will be the results! For it must not be forgotten that a business which actually made a loss would, under the scheme which has been proposed, still have to pay some form of licence fee.

Then there is the Sales Tax. This proposed tax was not introduced in the United Kingdom primarily as a revenue-producing measure but rather to restrict the demand for consumer goods at a time when they were in very short supply. The tax is normally collected through the wholesalers but this would not be practicable here and it would be necessary to rely on collection through retailers. The opportunities for evasion would be extensive and there would be far more incentive than in the case, say, of the restaurant meals tax in respect of which large-scale evasion is nevertheless taking place. Moreover, if a general rise in the already extravagantly high cost of living were to be avoided it would be necessary to exempt a long list of articles which could be regarded more or less as necessities. If Honourable Members will consider for a moment what proportion of their normal purchases are not really necessary and can be regarded purely as luxuries, they will I think agree that the range of goods which could reasonably be taxed without affecting the cost of living would not be very extensive. The luxury of yesterday is always tending to become the necessity of today, and if the range of goods taxed were very wide the burden would fall more heavily on the man with a large family and on those with modest incomes than would the tax payable under the Bill which is the subject of this debate. Indeed, the effect of the Sales Tax would be that the amount of tax paid would be proportionate to the amount which the unfortunate individual was forced to spend to maintain his family.

The proposal that Customs Duty should be levied on luxury goods has not been so widely supported, and as the Hon. Mr. Watson has remarked in the course of his speech, the suggestion seems rather to have faded out. Unless the range of goods affected extended beyond the real luxury class into the necessity class the nett yield would be unlikely to be very great. A considerable increase in the staff of

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