XN000022-1973-03-02 — Page 21

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Friday, March 2, 1973

penalties for contravening those sections dealing with the financial

conduct of an insurance company could well be brought into line with the

recommendations of the Companies Law Revision Committee for infringement of

similar requirements in future companies legislation.

"So much for our future legislative intentions. I had better turn

now to the insurance industry and Wednesday's budget speech. If I had written

the budget speech when Tony Bennett telephoned me about this function several

months ago I would have politely declined the invitation, but here I am, regrettably.

You, or rather your policy holders, have gained to the extent that stamp duty

in respect of insurance policies has been abolished, at a cost to the revenue

of some $2.7 million per annum.

"But you, or rather your policy holders, have lost by the abolition

of insurance relief, one of the four selective allowances abolished in my budget

proposals for the reform of our system of salaries tax at a net cost to the

revenue of $151⁄2 mn. Now apart from my general dislike of selectivé

allowances in the context of our low tax system, I think I should make four

points to you. First, the original object of giving life assurance relief and the whole premise of subsequent legislation beginning at the end of the 18th century was to encourage thrift. Hong Kong simply inherited this type of all

allowance as one of the established forms of allowance without too much thought

being given to local circumstances and conditions. It was simply a traditional

type of allowance found in a British-type taxing system. allowance, peculiar to Hong Kong in the past, has been that the allowance was in the form of a straight deduction from income to reduce assessable income and

so the allowance had the effect of giving immediate benefit at whatever particular

schedular rate of tax was last effective on an individual taxpayer.

A feature of this

/Secondly