XN000022-1977-11-09 — Page 19

WEDNESDAY, NOVEMBER 9, 1977

- 18 -

FINANCIAL SECRETARY ANSWERS CRITICS OF HABITUAL

TRADER+ TAX ****

THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, REJECTED CRITICISMS THAT THE GOVERNMENT'S POLICY ON TAXATION OF HABITUAL TRADERS+ WAS DAMAGING THE STOCK MARKET.

+NO ONE HAS PRODUCED ANY EVIDENCE THAT THE INLAND REVENUE DEPARTMENT'S LEGITIMATE ACTIVITIES ARE REALLY DAMAGING THE MARKET, + MR. HADDON-CAVE DECLARED AT THE ANNUAL POLICY DEBATE WHICH RESUMED IN THE LEGISLATIVE COUNCIL THIS AFTERNOON.

MR. HADDON-CAVE ALSO REFUTED CHARGES THAT THE ACTIVITIES OF INLAND REVENUE DEPARTMENT HAD CAUSED GENERAL CONFUSION IN THE MARKET RESULTING IN PEOPLE HOLDING BACK FROM BUYING AND SELLING SHARES, THUS REDUCING THE LIQUIDITY OF THE STOCK EXCHANGES AND DAMAGING THEIR ABILITY TO PERFORM THEIR VITAL ROLE OF RAISING CAPTIAL.

+ON THE CONTRARY, THE DEPARTMENT HAS, FOR MANY YEARS, ASSESSED PROF ITS ON TRADING IN STOCKS AND SHARES AND PARTICULARLY THOSE RELATING TO THE ACTIVITIES OF STOCK BROKERS, THOSE IN ASSOCIATED ACTIVITIES AND THOSE INDIVIDUALS WHO WERE ENGAGED IN SHARE TRADING IN A SUBSTANTIAL WAY,+ MR. HADDON-CAVE POINTED OUT.

+TO PUT THIS WHOLE MATTER IN PERSPECTIVE, 97 PER CENT OF THE PERSONS THE COMMISSIONER (OF INLAND REVENUE) IS ASSESSING AT THE PRESENT TIME ARE DIRECTLY CONNECTED WITH THE STOCK BROKING BUSINESS, + HE EMPHASISED.

REFERRING TO THE DIFFICULTIES IN DISTINGUISHING BETWEEN CAPTIAL GAINS AND THE TRADING PROFITS, MR. HADDON-CAVE SAID THESE COULD BE RESOLVED BY THE APPLICATION OF CERTAIN CRITERIA KNOWN AS THE +BADGES OF TRADE+ WHICH, THE THIRD INLAND REVENUE ORDINANCE REVIEW COMMITTEE ENDORSED, HAD STOOD THE TEST OF TIME AND COULD NOT BE BETTERED'.

+PROFESSIONAL TAX ADVISERS ARE WELL ACQUAINTED WITH THE BADGES OF TRADE AND HAVE LITTLE DIFFICULTY IN ADVISING CLIENTS ON THE IR APPLICATION TO THEIR AFFAIRS,+ MR. HADDON-CAVE POINTED OUT.

HE ALSO NOTED THAT +WHILST PERSONS WHO MAKE PROF ITS CLAIM TO HAVE DIFFICULTY IN RECOGNISING THEMSELVES AS TRADERS, THE SAME IS NOT TRUE OF LESS SUCCESSFUL BUYERS AND SELLERS OF SHARES WHO QUICKLY IDENTIFY THEMSELVES AS TRADERS IN ORDER TO CLAIM THE IR LOSSES AGAINST OTHER FORMS OF INCOME.+

-

ON THE QUESTION OF REDUCING THE PRESENT RATE OF STAMP DUTY $4 PER MILLE ON SHARE TRANSACTIONS TO STIMULATE ACTIVITY ON THE STOCK EXCHANGES, MR. HADDON-CAVE SAID THAT IT WAS INCREASED IN 1973 AS +A MEANS OF RAISING ADDITIONAL REVENUE AND NOT FOR REGULATORY PURPOSES AS IS SO OFTEN INCORRECTLY ALLEGED.+

+NO HARD EVIDENCE HAS BEEN PRODUCED TO SUPPORT THE VIEW THAT $4 PER MILLE ON TRANSACTIONS IS INHIBITING INVESTORS,+ HE SAID.

+ IF IT COULD BE SHOWN THAT THE GOVERNMENT WOULD GET... MORE REVENUE FROM A REDUCED RATE OF DUTY, THEN I MIGHT CONSIDER THIS POSSIBILITY. OTHERWISE, THE RATE MUST STAY AS

IT IS, HE ADDED.

لي

/19