XN000022-1987-03-18 — Page 8

WEDNESDAY, MARCH 18, 1987

THE FIRST CONCERNED THE INTRODUCTION OF SEPARATE TAXATION FOR MARRIED WOMEN, HE SAID.

IN THIS RESPECT,

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MR WONG SAID HE BELIEVED THE PRINCIPLE WAS SOUND BUT WHETHER IT WOULD FIT INTO THE EXISTING TAX STRUCTURE WAS A MATTER FOR FURTHER DELIBERATION.

MR WONG THEN ELABORATED HIS VIEWS ON THE SECOND SUGGESTION BY THE FINANCIAL SECRETARY ON WHETHER A BROADER AND MORE STABLE TAX BASE SHOULD BE ADOPTED BY INCREASING THE PROPORTION OF REVENUE TO BE DERIVED FROM INDIRECT TAXES.

HE POINTED OUT THAT HONG KONG HAD A SIMPLE TAX SYSTEM WHICH WAS CHEAP TO ADMINISTER AND EASY TO ENFORCE WITH THE BURDEN BORNE MAINLY THROUGH DIRECT TAXES SUPPLEMENTED BY A FEW CLEARLY DEFINED INDIRECT TAXES.

HE FELT THAT A MORE FUNDAMENTAL QUESTION WAS WHETHER IT WAS RIGHT FOR A GOVERNMENT TO CHOOSE ARBITRARILY WHICH GOODS AND SERVICES WERE LUXURIES AND WHICH OF THEM SHOULD BE TAXED.

+ THE REAL INEQUITY, IN MY VIEW, ARISES FROM THE UNEVENNESS AND PERHAPS DISCRIMINATION INVOLVED IN TAXING SELECTIVELY A SMALL NUMBER OF PRODUCTS AND LEAVING UNTOUCHED MANY OTHER LUXURY ITEMS WHICH MIGHT JUST AS REASONABLY BE SUBJECT TO TAX,+ HE SAID.

CITING ILLUSTRATIONS, HE ASKED: +WHY TAX SOFT DRINKS AND NOT CHOCOLATES OR CAKES? WHY COSMETICS AND NOT JEWELLERY OR SILK DRESSES ?+

MR WONG AGREED THAT A POSSIBLE AND PERHAPS MORE EQUITABLE SOLUTION WAS TO SPREAD THE LOAD VERY WIDELY BY TAXING AT VARYING RATES A WIDE RANGE OF GOODS AND SERVICES, THEREBY PRODUCING A SYSTEM OF INDIRECT TAXATION ALONG THE LINES OF THE VALUE ADDED TAX (VAT) SYSTEM IN THE UNITED KINGDOM.

HOWEVER, HE WARNED THAT THE PERPLEXITY AND QUANTITY OF TAX RETURN FORMS FOR BUSINESSMEN IN THE UK AS A RESULT OF VAT HAD ALREADY CAUSED MANY SMALL BUSINESSES TO CLOSE DOWN AND URGED HONG KONG TO LEARN THE LESSON FROM THE UK EXPERIENCE AND TO KEEP THE TAX SYSTEM SIMPLE.

+AT THE END OF THE DAY, IF WE CHOSE TO MOVE IN THE DIRECTION OF A BROADLY BASED INDIRECT TAX, THEN IT MIGHT BE NECESSARY TO DEVISE A SIMPLIFIED VERSION OF VAT. EASY TO ADMINISTER AND SUITABLE FOR APPLICATION WITHIN THE FRAMEWORK OF OUR SIMPLE TAX STRUCTURE,+ HE SAID.

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/HE STRESSED