TNAG-0279-FCO40-315-Visit-of-Secretary-of-State-for-Foreign-and-Commonwealth-Aff-1970 — Page 98

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tain circumstances on the highest personal incomes) but was

raised to 15% in 1957; no bax is charged on income or profits

arising outside the Colony. There is no general tariff and duty

is levied only on alcoholic beverages, tobacco, hydrocarbon oils,

table-waters and methyl alcohol imported or manufactured for

internal consumption. The other main sources of reverie are rates

on property, stamp duties, estate duty, taxes on betting and enter-

tainment and land sales. Annual revenue and expenditure have

nearly doubled since 1953 to £170 m. and £139 m. respectively in

1969/70. There was a budget deficit in 1959/60 (£2.8m) and in

1965/66 (£8.6m) but in all other years since 1947 surpluses have

been realised.

The 1969/70 budget surplus is estimated to be over

£20 million and a surplus of £9 million is budgeted for in the

current year.

The

3. We (and also the World Bank) have expressed doubts whether the

Hong Kong Government should not increase taxation, and also raise

more loans, to pay for an even bigger development programme.

Hong Kong view is that their traditional fiscal policy is the

cornerstone of the Colony's remarkable economic progress. Given

the political insecurity of the Colony and the Chinese dislike for

economic regulation and high taxation, the Hong Kong Government feel

This is of a that there would be risk in changing their policies.

piece with their general attitude of laissez-faire in economic

matters the only free exchange market in the Colonial territories,

free movement of capital, and as light a hand as possible on any

form of control of private enterprise.

4.

It must be said that Hong Kong risks carrying this policy of

laissez-faire too far, The banking crisis early in 1965, when the

failure of two small Chinese banks led to a general run on banks which

had to be checked by emergency measures, would not have happened if

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