XN000022-1981-02-25 — Page 28

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SIR PHILIP SAID THIS APPROACH WOULD BE SUBJECT TO THE ADVICE OF EXECUTIVE COUNCIL AND TRANSITIONAL ARRANGEMENTS WOULD HAVE TO BE VERY CAREFULLY DEVISED. HE ALSO SAID HE INTENDED TO FORWARD TO THE COUNCIL A REVIEW OF THE POLICY ON LICENSING OF BANKS UNDER THE BANK ING ORDINANCE.

SPEAKING ON TAXATION TREATMENT OF FOREIGN CURRENCY DEPOSITS, SIR PHILIP SAID HE WAS ABSOLUTELY SATISFIED THAT THERE WAS NO CASE, ON ANY GROUNDS, FOR THE TOTAL ABOLITION OF INTEREST TAX.

BUT, HE ADDED, THE FISCAL AND MONETARY ARGUMENTS HE HAD DEPLOYED IN 1973 AND 1974 AGAINST THE CONCEPT OF EXEMPTING FOREIGN CURRENCY DEPOSITS HELD IN HONG KONG MIGHT BE NO LONGER VALID IN PRESENT-DAY CIRCUMSTANCES.

HE SAID A PROPOSAL IS NOW BEING STUDIED IN WHICH INTEREST PAYABLE ON DEPOSITS DENOMINATED IN FOREIGN CURRENCIES ABOVE A CERTAIN MINIMUM SIZE, ACCEPTED BY INSTITUTIONS OF A CERTAIN STATUS (LICENSED BANKS AND THE PROPOSED MERCHANT BANKS), BE MADE EXEMPT FROM ANY WITHOLDING OBLIGATION,

+ IF THE OUTCOME OF THE EXAMINATION OF THIS PROPOSITION IS THAT THE FISCAL AND MONETARY IMPLICATIONS OF IMPLEMENTING IT ARE REASONABLY PREDICTABLE AND AT LEAST NEUTRAL, AND THE ECONOMIC IMPLICATIONS PROBABLY BENEFICIAL, THEN, SUBJECT TO THE ADVICE OF EXECUTIVE COUNCIL, AN APPROPRIATE AMENDMENT TO THE INLAND REVENUE ORDINANCE WILL BE INTRODUCED INTO THIS COUNCIL LATER THIS SESSION,+ HE SAID.

HK'S TERTIARY SERVICES TO GROW WITH CHINA TRADE

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THE RELATIVE SIZE OF THE CONTRIBUTION OF HONG KONG'S TERTIARY SERVICES SECTOR IS ENVISAGED TO CONTINUE INCREASING DUE, IN NO SMALL MEASURE, TO DEMANDS LIKELY TO ARISE FROM THE EXPANSION OF CHINA'S

INTERNATIONAL TRADE, A CONDITION AND A CONSEQUENCE OF THE FOUR MODERNISATIONS PROGRAMME.

THIS WAS STATED TODAY BY THE FINANCIAL SECRETARY, THE HON

SIR PHILIP HADDON-CAVE IN HIS BUDGET SPEECH.

SIR PHILIP NOTED THAT ADDITIONAL FACILITIES ARE BEING PROVIDED TO COPE WITH THESE DEMANDS. THESE INCLUDE THE MODERNISATION OF THE KCR WHICH WILL IMPROVE RAIL LINKS WITH CHINA BY THE END OF 1982- RECLAMATIONS IN CHEUNG SHA WAN AND WESTERN WHICH WILL ENABLE

IMPROVEMENTS TO BE MADE IN THE SEA LINK FACILITIES AND THE IMPROVEMENTS TO THE ROAD LINKS WHICH WILL TAKE LONGER TO ACHIEVE. STUDIES ARE ALSO IN PROGRESS ON OIL RELATED FACILITIES AND THERE HAVE BEEN VARIOUS EXCHANGES OF MISSIONS WITH CHINA AS PART OF A MUTUAL EFFORT TO STRENGTHEN OUR ECONOMIC LINKS GENERALLY.

HE SAID THE PROVISION OF SUCH ADDITIONAL FACILITIES WOULD ALSO CONSTITUTE A FURTHER DIVERS IF ICATION OF OUR ECONOMY AND SHOULD MAKE IT LESS VULNERABLE TO DOWNTURNS IN SPECIFIC TRADES.

+SO I ENVISAGE THAT INFRASTRUCTURAL AND INSTITUTIONAL DEVELOPMENTS IN HONG KONG WILL BE COMPATIBLE WITH TRADE AND OTHER FLOWS TO, AND FROM, CHINA THROUGH HONG KONG, SIR PHILIP SAIL.

/WITHIN Tas .................