TNAG-0283-FCO40-319-Exchange-of-officers-between-government-of-Hong-Kong-and-UK--1970 — Page 46

CONFIDENTIAL

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7.

I agree that we do not want to get bogged down in any doctrinaire argument about all this, but your proposals would constitute a somewhat novel arrangement and I think they need careful examination, which we are instituting here. stage I would like to make two points that seem to us to require further detailed consideration:-

(1)

(11)

Status:

At this

such an arrangement as you propose might raise doubts about the status of the officers concerned at both ends. If we each took responsibility for paying our own officers at the rates appropriate to their respective services (and for meeting the pension liability of our own officers arising from the period of service involved) it would tend to blur the issue as to which Government they are serving. In a sense they might be regarded as "lent" or "attached", and in no way formally placed in the service of the other government: it would be almost as if they had been sent on courses. What implica- tions this (as distinct from the usual formal second- ment terms) may have for such matters as disciplinary control, application of our respective official Secrets Acts, etc. we shall have to look into. If you have not already done so, you may want to consider the danger that your unofficials might regard officers employed under such arrangements with some suspicion. As you know, we have in the past had to move with great circumspection in relation to the Political Adviser's position in order to make it clear that he is in the service of the Hong Kong

We shall Government and is not an outpost of H.M.G. need, I suggest, to be equally careful in the case of any other Diplomatic Service officers working for the Hong Kong Government. It would seem therefore that whatever financial arrangements we might agree the exchanges must otherwise be brought strictly within the usual secondment arrangements.

Income Tax Liability: the much higher incidence of U.K. income tax would appear to raise a problem so far as your officers would be concerned.

In the usual form of secondment the officer is paid by the receiving Government and pays tax only to that Government. This was the basis on which the Political Advisers originally served; they paid Hong Kong tax only. Their terms of service have since been changed as you have indicated. From H.M.G. funds they are now paid their Diplomatic Service salaries (and allowances appropriate to Hong Kong) and the Hong Kong Government reimburse H.M.G. (paying additionally a contribution in respect of the pension liability). Thus the Political Advisers are now liable to double taxation - in the U.K. since H.M.G.

/pays

COI FIDENTIAL