TNAG-0522-FCO40-617-Discussions-with-Sir-Murray-MacLehose--Governor-of-Hong-Kong-1975 — Page 139

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Mr Stuart

HK/IOD oin.

RECORD OF MEETING BETWEEN LORD GORONWY-ROBERTS AND THE GOVERNOR OF HONG KONG ON 18 DECEMBER 1974

1. There is a certain complacency about this record, with all queries and doubts carefully ironed out, which worries me a little. However, this minute is concerned with what I think is an inaccuracy in the record.

2. Paragraph 4 of the record gives figures and conclusions that are, I think, at variance with the facts, The Hong Kong Report for 1973 (page 220) sets out Government revenue by source as follows:-

$HK

Direct taxes

1028.9

Indirect taxes

1252.5

Other Revenue

1365.6

Reimbursements,

Contributions and

Loan Repayments

56.7

3703.8

Development Loan

Fund Receipts

43.9

Lotteries Fund Receipts

8.5

3756.2

These figures indicate that direct taxes raise 27% of the revenue and indirect taxes 33%. Other Revenue is also therefore inaccurate as shown in the record.

3. The final sentence of paragraph 4 is particularly misleading. Direct taxation is among the lowest anywhere and the separation of salaries tax from profits tax for calculation purposes has long been criticised as creating loopholes. The previous Financial Secretary has regarded suggestions for comprehensive income tax as "inquisitorial" (Budget Debate 1967).

6 January 1975

c. Mr Male

SECRET

G Foggon

FURTHER PAPERS TRANSFERRED To

HKK 20/4 1975