XN000022-1983-02-23 — Page 16

WEDNESDAY, FEBRUARY 23, 1983

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HE SAID THERE MUST BE A DIVISION OF THE DEFICIT BETWEEN INCREASED TAXATION AND USE OF RESERVES AND THAT HE HAS DECIDED THIS YEAR TO TAP BOTH SOURCES APPROXIMATELY EQUALLY.

THE QUESTION, MR BREMRIDGE SAID, ARISES OF HOW THIS ADDITIONAL TAXATION COULD BEST BE RAISED AND, EVEN IF UNPOPULAR IT MUST BE ACCEPTED AS FAIR BY THE REASONABLE MAJORITY WHO CAN SEE THAT THERE ARE NO EASY OPTIONS.

HIS OPINION WAS THAT IT WOULD BE INOPPORTUNE NOW TO INCREASE THE TAX ON THE PROFITABILITY OF BUSINESSES AS EMPLOYMENT AND EXPORTS DEPENDED ON THE MAINTENANCE OF INVESTMENT AND REINVESTMENT.

+I BELIEVE THAT THIS VIEW IS WIDELY ACCEPTED AND I DO NOT INDEED PROPOSE ANY INCREASE IN PROFITS TAX,+ HE SAID.

AS FOR SALARIES TAX, AN OBVIOUS WAY SUBSTANTIALLY TO INCREASE THE YIELD WOULD BE TO REDUCE THE ALLOWANCE WHICH WOULD ALSO BRING INTO THE SALARIES TAX NET MANY OF THOSE WHO NOW PAID NOTHING.

HE SAID HE WAS AWARE OF THE PROBLEMS OF THE LOWER PAID AND ALSO, HE BELIEVED STRONGLY THE ECONOMIC SUCCESS OF HONG KONG OWED MUCH TO LOW DIRECT TAXATION.

WHILE ALL BENEFITTED FROM LOW TAXATION THE FACT THAT MOST WORKERS COULD POCKET THEIR WAGES PLUS POSSIBLE OVERTIME WITHOUT NEEDING TO PAY ANY DIRECT TAX IS ONE OF HONG KONG'S MOST IMPORTANT SPURS TO PRODUCTIVITY, HE POINTED OUT.

HE ALSO SAID?. +THERE IS YET ANOTHER FACTOR. THE RATIO BETWEEN DIRECT AND INDIRECT TAXATION MOVED FROM 57:43 IN 1977-78 TO 64:36 IN 1981-82 AND TO 69:31 IN 1982-83. THE DRIFT INDICATES THAT THE BALANCE BETWEEN DIRECT AND INDIRECT TAXATION HAS SHIFTED AGAINST INDIRECT TAXATION.

+THIS ARISES FOR CLEAR REASONS, I.E. HIGHER PRODUCTIVITY OF DIRECT TAXATION PLUS THE LARGE SURPLUSES ACCRUED IN RECENT YEARS, WHICH HAVE MADE RAISING TAXES UNNECESSARILY. IN BRIEF OUR TAX SYSTEM HAS BECOME UN BALANCED, AND THERE IS A CASE ON THESE GROUNDS ALONE FOR INCREASING THE LEVEL OF INDIRECT TAXATION.

+THIS BRINGS WITH IT ONE OTHER ADVANTAGE. I BELIEVE THAT THERE ARE ATTRACTIONS IN SYSTEMS OF TAXATION BASED ON EXPENDITURE RATHER THAN INCOME, AND IT SEEMS TO ME AS A GENERALISATION THAT THOSE WHO CHOOSE TO SPEND ON SUCH PURSUITS AS DRINKING, SMOKING OR OWNING MOTOR CARS CAN REASONABLY EXPECT TO BE TAXED MORE HIGHLY THAN THOSE WHO DO NOT.

+THESE TAXES CAN BE AVOIDED. IF YOU DO NOT WISH TO PAY THEM YOU DO NOT NEED TO, ADMITTEDLY NOT ALL MY PROPOSALS CARRY

THIS JUSTIFICATION.+

HE SAID HE HAS 11 PROPOSALS FOR INCREASING REVENUE WHICH HE ESTIMATED WOULD BRING THE NECESSARY $3 BILLION IN 1983-84.

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