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HONG KONG LEGISLATIVE COUNCIL
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HONG KONG LEGISLATIVE COUNCIL
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Hong Kong dollar, has been devalued in terms of U.S. currency, and to work to the same limit on the open account, it is neces- sary to seek the approval of this Council for the limit on the Suspense Account to be increased to the new equivalent of 21 million U.S. dollars. To the nearest round figure this is taken as 15 million Hong Kong dollars.
I have to admit frankly that when I took over the Depart- ment of Supplies and Distribution I found that the Japanese Trade Suspense Account exceeded 15 million dollars, and it still exceeds that total. This position results from the crisis which followed on devaluation and the interruption in trade which was necessary to enable us to take stock. It was thought at that time that, being in an oversold position, we should have to take a heavy loss, but measures which have since been taken, and are still being taken, have materially reduced
our initial estimate, and it now looks as if our devaluation loss will be more than offset by profits made before and since. Honourable Members will not, I trust, expect me to commit myself on this matter until it proves possible to produce properly audited accounts. These cannot be produced until they have been reconciled with those maintained with the Supreme Commander of the Allied Powers, who seems to have experienced even greater difficulties in maintaining his accounts than has this Government.
It is now common knowledge that Government has recently succeeded in divesting itself of some of its responsibilities for Japanese trade, and this step should in time result in consider- able savings.
If I may revert again to the question of the limit to the Suspense Account, I am sure that Honourable Members will understand that keeping to it is a task of some difficulty. When a merchant exports goods to Japan, he is granted the privilege of importing goods to the value of 60% of his exports. Now the Suspense Account is debited with the value of his exports when they are made, but it may not be credited with the value of the imports until possibly as long as eight months afterwards. Thus, it is comparatively simple to keep the forward position within the approved limit, but when the lesson of devaluation is fresh in our minds, the maintenance of the limit on the actual cash position is a source of constant anxiety. None the less, I can assure Honourable Members that efforts are now being made to bring the balance down to $15 millions, and if experience should finally convince us that on the existing volume of trade, the limit is too low, the approval of this Council will be sought for an increase.
On the subject of Government trading generally, I can but repeat the words in Your Excellency's Despatch, that Government views its continuance without enthusiasm. Efforts have been made in the past to return the procurement of coal and flour to private hands, but these efforts were unsuccessful.
Government now feels that it has certain definite responsibilities to the public in this matter. If trading in any essential com- modity is to be returned to private hands, Government must be assured firstly, there will not be an undue rise in cost to the consumer, to increase yet further the cost of living; and secondly, that adequate stocks will be maintained against a possible emergency.
THE COLONIAL SECRETARY seconded, and the Motion was carried.
INLAND REVENUE (AMENDMENT) BILL, 1950.
THE FINANCIAL SECRETARY moved the First reading of a Bill intituled "An Ordinance to amend the Inland Revenue Ordinance, 1947". He said: Sir, Honourable Members will recollect that in the course of the debate on the Estimates, the Financial Secretary indicated that the sum of $12 millions would have to be raised by new taxation to cover the revised Estimate of Expenditure and give us a surplus of $3 millions, and they will remember also that the Revenue Estimates as originally framed were amended firstly by the alteration of the figure for Earnings and Profits Tax from $38 millions to $44 millions, and secondly, by the introduction of a new item of $6 millions for Business Registration Tax.
It was first proposed that the standard rate of tax on Earnings and Profits should be increased by 50%. As a result of the helpful suggestions by Honourable Members in the course of the debate, Government now proposes to raise $6 millions by increasing the standard rate of tax by 25%, that is, from 10% to 12% and to make up the additional revenue still required, by the imposition of a Business Registration Tax. Work is now in hand on the drafting of an Ordinance for this latter purpose.
The bill now before this Council provides for the increase of 25% in the standard rate of tax on earnings and profits. It is a short Bill, and provides only for the increase in the tax and for certain concessions to the payer of Salaries Tax which were forecast by the Financial Secretary in this Council. The Attorney General's Memorandum on the Bill is so full, that there is only one thing that I can usefully add. The relating of "rental value" to a percentage of the taxpayer's income takes care of anybody who occupies good quarters, but it might easily bear very hardly on a person with a sizeable income who occupies poor quarters. The Bill accordingly provides that any taxpayer occupying a tenement who so desires, may elect to be assessed on the rateable value rather than on the artificial rental value related to his income, if he thinks it will be to his advantage. And to avert a rush of applications to elect from those who must live in hotels or hostels, it is provided that such persons should receive a further concession in any event.
The effect of the concession to persons liable to Salaries Tax, or paying under the Personal Assessment scheme, which
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