CO129-623-8 Estimates of Expenditure- includes a report for the year ending March 1951 1-12-1949 - 31-3-1951 — Page 136

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by the Public Works Department for the Military

Authorities, and which would normally have been met by the latter, have been charged to Colonial funds.

It is proposed to cover this deficit by an increase in the standard rate of tax under the Inland Revenue Ordinance to 15 per cent. The bulk of the yield of direct taxation is

om the tax on Corporation Profits, in respect of which the full new rate would of course be payable.

It is, however, realised that the very high local cost of living, which has unfortunately shown a tendency to increase further of late, affects the individual more severely than the company. In the case of Salaries Tax, therefore, it is proposed to cushion the effect of the increase by providing that the rate of tax should be increased by gradations of 3 per cent instead of 22 per cent. This means that the standard rate would be reached at the fifth step and double standard rate at the tenth step instead of at the fourth and eighth as at present. The position of individuals engaged in trade or business, particularly professional men, has also been considered in this connection, and it is proposed to introduce certain concessions in regard to Business Profits Tax.

Section 6(1) of the Inland Revenue Ordinance provides that where ronts are restricted, Property Tax should be charged at one half the standard rate. It is proposed to continue this concession for the present, but half the standard rate will of course become 71⁄2 per cent instead of 5 per cent.

These measures mve not yet been worked out in full, but they should realise some $12 million of which $8 million would be derived from Corporation Profits Tax. This would wipe out the deficit and leave an apparent surplus of some millions from which the two indeterminate liabilities above mentioned could be met.

Duties.

The estimate of $39,300,000 is $5,050,000 more than the original estimate for 1949/50, and $23,950,000 lower than the revised estimate. As has been pointed out earlier in this memorandum, there was a heavy and unexpected increase in receipts from tobacco duty during 1949/50, and to a lesser extent. from liquor and petroleum products, as owing to the generally unsettled conditions local duty was paid on consignments exported, while drawback was rarely claimed. This windfall, however, appears to be slackoning off, and the best opinion available considers that it would be unwise to count on a revenue from tobacco in 1950/51 exceeding $18,000,000, which is $1,000,000 in excess of the revenue actually derived from this source in 1948/49. Increases over the approved estimate for the current year have been allowed for in the case of duties on hydro-carbon oils, on perfumed spirits, on locally manufactured liquor, and on toilet preparations in view of the increased population. The increase in the duty on table waters during the year just ending produced more revenue than was anticipated, and this combined with the increase in the population has justified the doubling of the 1949/50 approved estimate.