363
364
51
50
HONG KONG LEGISLATIVE COUNCIL
more
necessary to take into consideration all local expenditure met from Colonial funds which is related directly or indirectly to security and defence. Some items of such local expenditure would normally have been met by the War Department, but have, pending a final settlement, been charged to Colonial funds under a proposal that expenditure on work carried out by the Public Works, at the request of the Military Authorities, should rest where it lies. An example of this is the work on two new roads which are now being constructed in the New Territories. It will be recollected that the sum of $1 million was provided in the 1949/50 estimates for the improvement of roads and tracks, and when the Military Authorities expressed the view that the construction of these two new roads was important, it was agreed that this sum of $1 million should be made available for the purpose. This has since been supple- mented to the extent of $750,000, and a further $2 million has been provided in the Estimates for the coming year under sub- head 3 of Public Works Non-Recurrent. In the view of this Government, it is necessary in considering the question of the contribution, to take into account the claims of various sorts which still remain unsettled from the last war, and it is hoped that at a conference which is to be held in London during the latter part of April, this aspect of the matter will be given due weight. It is proposed that I should attend the conference, as well as the Colonial Secretary, Mr. J. F. Nicoll, who is already in London.
We have therefore a gap of possibly $7 million to bridge which we know of, and we have two further indeterminate liabilities which may have to be met before the end of the year. We cannot at the present stage even make a rough guess as to the extent of these liabilities, but they may amount to some millions. In these circumstances, Government has regret- fully reached the conclusion that it is necessary to impose additional taxation.
It will no doubt be urged that there is no necessity to take such a step, and that the deficit could be met from surplus funds which we have gradually accumulated since the Colony was re-occupied. This, however, would not be sound finance. The Colony cannot be regarded as reasonably secure until it has reserves amounting to at least a year's revenue. Personally I consider that, in these troublous times, a reserve of one year's revenue is not enough. But however that may be, we are still a good way from attaining even that figure. Conditions in the world to-day are such that the economic position of any country can deteriorate seriously almost over night, and with very little warning. In these circumstances it would, I submit, be dangerous to draw on the reserves which we are just beginning to build up.
It may also be suggested that we should defer any action in regard to increased taxation in the hope that there will be another windfall such as has occurred during the present year.
HONG KONG LEGISLATIVE COUNCIL
That also would not be sound finance. It must not be forgotten that Hong Kong represents an island of stability in a sea of political uncertainties. Much of its prosperity depends on the maintenance of
a sound currency and proper financial equilibrium. People in the neighbouring countries watch closely how we manage our affairs, and I maintain that we cannot afford to resort to unsound financial practices.
A third criticism may be that the Public Works programme is too extensive, and that it could be cut down very considerably. To this I would say that the number of desirable and indeed, in some cases, essential works which still remain to be carried out is legion. The cost of schemes of various sorts which were put up for consideration and could not be included was $26 million. This covered work asked for by the Medical and Education Departments, drainage work, road work items, and, in regard to the last mentioned, I might point out that we are still very far from completing the reconstruction of the hundreds of side streets which have received no attention since 1941, and which now consist more of potholes than surface.
When it is a question of covering a deficit of $1 million or possibly $2 million, this can be done in a variety of ways, as it is usually possible to find a couple of lakhs here and $ million there comparatively painlessly by adjusting the rates of some existing forms of indirect taxation, or introducing new ones. But where it is necessary to find quite a large amount, there is no alternative but to turn to direct taxation. The choice appears to be limited to an increase in the rates or the raising of the standard rate of tax under the Inland Revenue Ordinance. After much consideration Government has decided that the latter is the preferable course, and it is proposed to introduce a Bill shortly, increasing the standard rate of tax from 10 to 15 per cent. for the year of assessment 1950/51.
Our direct taxation takes the form of a number of related taxes. The greatest yield is derived from the tax on Corporation Profits which would pay the full new rate. As all the different taxes under the Inland Revenue Ordinance are closely inter- connected, it would not be equitable to increase one without bringing the others into line. It is, however, realized that the very high 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 2 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. In the case of gross incomes of less than $50,000 per annum, the additional tax payable would amount to 20 per cent. of that now paid. Thus a person now paying $200 in tax would in future pay $40 more. The position of individuals engaged in trade or business, particularly pro-
No comments yet.
Private notes are available after approval.