PAGE 6 HONGKONG DAILY PRESS,
FRIDAY, NOVEMBER 10, 1939.
GOVERNMENT READY TO STUDY MODIFICATIONS
not different from the ordinary} stock-in-trade of the tax dodgers| all over the world.
I have never denied per- sonally that this question of prevention of evasion is by far the greatest problem in the administration of income tax, whether here or anywhere else. but I see no reason why It should be less capable of solu- tion here than in other coun- tries.
no such intention has ever existed.
These advantages will remain In the last four weeks the and when some of the wilder talk prices of the principal Hongkong MAIN OBJECTION,
about the imposition of an in-shares have moved hardly at all; come tax has died down "I do not out what movements have oc- The honourable the sentor Chi- believe that the enterprising busi-curred show an average increase nese member has made comments ness
will refrain from of about 1 per cent. on question of administration coming here to make a profit which form the main basis of his merely because that profit will not from
These are the only indications object principle and which I be quite so large as it might have form any judgment as to whether which I personally can therefore, want to comment upon been
capital is leaving the Colony and in some detati,
they suggest that it is not.
It is, however, alleged that the existence or prospect of ар income tax will drive capital away from the Colony and is in fact doing. There are few things about which more nonsense is talked "than about capital being removed from a country.
GOVT, DOES NOT KNOW No doubt I shall again be told that a great deal is going on which: Government does not know about and I can only repeat that it is impossible for the Govern- ment to know things if the people who claim to have the informa- The bulk of the capital investion do not take the trouble to ed in Hongkong is invested in communicate it. plant and equipment of all kinds,
for example, the cables of the some quarters that our entrepot It is I belleve, asserted in
panies which cannot very well be able, I say asserted because I have telephone and electricity Com- trade makes income tax unsuit-
First, with all respect, I do not belleve In this mystery of Chinese accounting; nothing I have heard We are being constantly told of. It suggests that it is very that: Income tax has failed in this different from the system adopted country or that. All I can say is by small businesses in Europe as that in those British countries distinct from the complicated ac- where it exists today, that is not countancy of big European firms; the official view; and there has and the adjustment of such ac- been a steady increase in the num-counts for income tax is commor ber of countries in which income routine. tax exists and in the reliance
Secondly, I cannot follow him in which is placed upon it in those: countries as one of the most im into Chinese and the rest. The his belief that humanity is divided
argument that income tax has
never heard any attempt to prove" never been successfully applied to
or even explain the statement. There is only one other thing Chinese is appealing, but what are
have heard the echoes to a good which strikes me in this talk of the facts? As to China itself. It evasion-it is notorious that other surely obvious that the adminis-
many discussions about introducing INCOME WILL REMAIN taxes are evaded to a greater or tration, for reasons I need hot
income tax in various countries The income from it, however, and it is curious how unanimous less extent: eg. Import duties on elaborate, is too weak to enforce will remain liable to Hongkong the opponents always are that tobacco and Ilquor are certainly any such tax: but there are other income tax if it is imposed, and the particufar country is so not 100 per cent effective; and laws which are not enforced in it is a matter of indifference to peculiar that what work else- from time to time Government is China which we still make a fair Government whether that tax is where will not work there; but obliged to institute prosecutions show of enforcing here.
paid by the existing owner or failure to pay, say the stampi duties or wireless licences.
portant sources of revenue.
TALK OF EVASION
5
IN SINGAPORE
very good authority that the en
As to Singapore, I have it on forcement of Income tax was never really seriously pursued.
removed from the Colony. All that can happen to such property is that the owner of it can sell to somebody else.
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ï
not
of the coron plea is rather the by somebody else who buys his apposite of this particular theory, property from him. It does not occur to anybody.
other kinds of capital which cantural
It is usually argued that income I do not deny that there are tax is not suited to however, to suggest that these
be removed. The principal type trading communities..
agricul- countries but anly. ta taxes should be abolished because they are not quite 100 per cent
of such capital is actual cash effective, and if the auggestion is:
Lastly Mr. Chau has not men- balances which may be placed
RE-EXPORT TRADE made in the case of income tax Itloned one place where a large on deposit with banks or other Government "is certainly cannot but suspect that it covers community of Chinese does, I am financial institutions and which lacking in solicitude for the re- some other motive.
reliably informed, pay income tax undoubtedly have come to Hong-export trade. as 'our reluctance to developed what they regard as a place. and where the authorities have kong as a temporary safe resting impose the full system of exchange satisfactory system of examining
and import control" demonstrates:
chinese
It is obvious that a non-resident and it is Government's view that accounts, Netherlands East Indies.
that is the who holds such deposits in Hong- the nature of our trade does make kong might be tempted to trans-ery undesirable many kinds of FLIGHT OF CAPITAL
fer them elsewhere if he had to pay but I cannot see how that trade taxation and many restrictions,
A good deal has been made of the alleged enormous expenditure on the collection of income tax The closest estimate of cost we can now make is something between three and four lakhs per annum.
goods but merely asks the trader to account in due course for the profits of those transactions.
For these reasons I am very strongly of opinion that the
practically all of which, of course, The last main group of objec-income tax in the interest reis damaged by a tax which im- will be for the staff required. This tions to income tax are of a kind Ceived from them, and the trans- poses no hindrance whatever to is in the first place a very small which Government ought to weigh fer of such deposits might do the free inflow and eatdow of percentage of the expected yield. very seriously, if they are in fact the Colony harm.
It will moreover in present cir- true: 1.e. that the imposition of an
BANK INTEREST cumstances be only to a small ex-income tax will drive business and For that reason the Bill which tent expenditure on пет staff capital away from the Colony, is now being examined by the since we expect to draw the ma- I may say that before the pro-Income Tax Committee, provides jority of the staff required from posal was brought forward in this that bank interest payable to non- other branches of the Government Council at all Government con-residents shall be exempt from service whose activities will have sulted certain leading
income tax. to be reduced to some extent and men and was assured that an in- whose leave is, under present ar- come tax at the comparatively low rangements, being drastically cur-rate proposed would not have any talled; so increasing the number of such effect. I still believe" that available officers.
that advice was entirely sound,
EXTRA EXPENDITURE
It is objected that the tax will cause a great deal of extra private expenditure particularly in the keeping of accounts and prepara- tion of returns. The ordinary man will not need any expert assistance
business
Again I would like to remind honourable members that this Is a tax on income and not a tax on invested capital as such or on the conduct of business as such.
The Imposition of income tax
It is alleged not merely that the existence of income tax will drive capital away in the future but that the prospect of it is already doing so. I do not "know where that in- formation is obtained,
· economic consequences of in- posing an income tax have "been enormously exaggerated. I am more inclined to belleve that because exactly the same prognostications of disaster have been made repeatedly in other countries, without ever having been realised so far as can be shown by actual facts. Movements of capital are not- Even with regards to the more oriously difficult to detect and I fluid kinds of capital for which we can only go by such indications have actually suggested special treatment it is extremely instruc-
as are "available"
In the first place if a lot of tive to note that the High rates of In the preparation of his returns will impose no hindrance to the dollars one would naturally expected Kingdom have never prevented peop't were selling Hongkong income tax prevailing in the Unit- unless he is seeking to avoid taxa-setting up of a business here, and the exchange rate to go down enormous influxes of money to
tion.
The officials of any income principles of the British - come tax administration will be perfectly willing to give quite bonestly any advice which may be required by the individual as regards the al- lowances to which he is entitled.
If that business is not successful
strangements;
it will pay no tax. If it is suc-within the limits permitted by London when the nervous capt cessful I do not think that the.
our stabilization
talist in Europe has thought that man who started it will go away in fact, however, anybody who for the moment London would be because he finds that he has to has dealings in the exchange a safer place to keep his money pay a proportion of his profits to market will know that the effec-in that in any other financial trze market rate has been for Government.
..
Again, that is not true of any many weeks at just about the alternative tax Increased rates, highest point at which the banks a sales tax, higher charges for can ix it under those atrange- As to business firms the extra electricity and telephones would ments.
HONGKONG DOLLAR expenses would be small except in all be burdens on a now busi- the case of firms which do not dess from its very commencement now keep any accounts at all. and whether or not it was pro-
For those firms I can only sug-fitable. gest that the necessity of compil- ing accounts for income tax pur- in poses should be a blessing in disguise and not a matter to be regretted.
1:
I might here refute the gen- eral apprehension that the keeping of accounts in English and the rendering of retums in English will be obligatory;
centre.
SECURITY OF CAPITAL
I believe that the capitalist is more interested in the security of his capital that in small variations in the net returns upon it and if right from the Hongkong dollar. maintained, which after all is the That does not indicate any the security of Hongkong can be
Secondly, the returns which Gov-fundamental reason for our selfish ernment is now receiving of ex-interest in the present war" I do. change transactions, detalls of not believe that capital will cease Hongkong has had and still has which it is impossible to publish, to come here, certain advantages to offer to do not indicate any such sub- business and manufacture, L stantial night.
HONGKONG ADVANTAGES
security, almost unique harbour Thirdly, if a nervous shareholder facilities, an administration which were trying to avoid payment of we can claim to reach high stan-income tax on Hongkong invest dard of honesty and impartiality.ments he might be expected to and freedom from irksome restric-sell his shares in Hongkong com- tions.
parles.
Before leaving this aspect of ⠀⠀ the matter, however, I do want to emphasise that the Govern ́ment is very ready to consider any modifications in the de- talf of an Iriċome Tax which will ̈ minimise such ́economic "dangers as exist,
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