TNAG-0453-FCO40-518-Budget-of-Hong-Kong-1974-1975-1975 — Page 142

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22.

A comparative table of tax rates in 167 countries

last year shows that, excluding certain

published in Januar

Tropical Island Tax Paradises, Hong Kong at 15% has the lowest rate of tax on company profits in the non-Communist world and it is on a territorial source basis only. however, that a business does migrate to one of these Tropical Island Paradises? Tax rates in these countries are low or

Supposing,

taxes are non-existent for a very simple reason.

They do not have an expensive infrastructure to maintain; nor do they have, in consequence, an infrastructure to offer the prospective migrant. Supposing, however, to develop the argument further, the business concerned does not need an infrastructure anyway. I know there are certain categories of business which could be transferred out of Hong Kong tomorrow morning by means of a telex message.

If so, it would be the shadow rather than the substance of a business which we would be losing.

23.

To sum up, therefore, I cannot see that the restoration of the profits tax charge will chase businesses away, but if some are chased away, they would not be of the type that means much to Hong Kong in terms of either genuine investment or jobs.

24.

(e) Financial control

Finally, I am delighted that my honourable Friend Mr. Li Fook-wo mentioned the Director of Audit's report on the Colony's accounts because this important document, together with the Accountant General's Annual Report, deserves more attention than it has traditionally attracted. He referred among other things, to the arrears of revenue of $88.6 million outstanding at 31st March 1973. Of this figure, overdue

Whilst

earnings and profits tax amounted to $39 million. every effort is being made to keep these arrears to a minimum and whilst the increase in the late payment surcharge announced in my budget speech and other changes to the law which the Commissioner has suggested to me are aimed at reducing arrears, they will inevitably tend to increase whenever yields are rising.

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