The Commissioner of Inland Revenue, in response to my observations, acknowledged that the Investigation Unit has tended to shift resources from special projects to referred cases which had the potential of producing the most fruitful retur the revenue and, whilst his Department had not lost sight of prosecuting tax evaders in appropriate cases, staff shortages had made it difficult to give more priority to this time-consuming work, particularly as there was the risk of losing a case as well as the administrative penalty in lieu of prosecution. However, he had submitted a proposal to increase the staff of the Investigation Unit for 1987-88. Whilst the Commissioner saw the benefits of a balanced approach to the selection of cases, the problem was one of allocating resources and he believed that the existing approach, which covered a wide variety of business activities, had been reasonably effective in providing a deterrent to tax evasion. He did not accept that greater emphasis on special projects would necessarily achieve a greater deterrent effect than his existing methods of investigation and was satisfied that the Investigation Unit's operations had established a credible threat of substantial retribution, which was one of the keys to keeping taxpayers from evading tax.
12. Senior Secondary and Tertiary Education - Fees.
13. Senior Secondary School Fees. The Government has not had a clearly defined policy for determining the level of school fees and subsidy for senior secondary education. There were only three increases in school fees during the past 26 years, in 1960, 1965 and 1979, which did little more than slow the underlying downward trend in the proportion of education costs financed from fees. The level of Government subsidy towards senior secondary education has increased correspondingly. It was recognized as early as 1958 that some criteria were necessary for determining school fees. The suggested criteria that have been made in the past include:
-fixing fees as a percentage of costs; or
―relating fees to the wealth of the community and the ability of the public to pay.
The 1978 White Paper on the Development of Senior Secondary and Tertiary Education set out the general guideline for determining school fees namely, "a reasonable share of the cost of extended education should be met through fees, coupled with satisfactory arrangements to provide relief to students from less affluent families", but no action was taken to implement this guideline by deciding on a reasonable share of costs to be met through fees and by devising a system for adjusting fees to take account of increases in costs.
14. In the absence of a clearly defined policy, it became the practice of the Education Department to consider and propose school fee increases only in the context of major pronouncements and changes in educational policy, such as major expansions of educational services. This practice was inflexible and did not have a rational basis because there were other factors, apart from educational policy changes, that affected education expenditure and the level of school fees. For example, during periods of high inflation it would be necessary to make frequent increases in fees in order to maintain their same real value.
15. In February 1983 the Deputy Financial Secretary introduced a computerized Fees and Charges Review System to assist controlling officers in the discharge of their responsibility to keep the level of fees and charges under regular review but the Director of Education questioned the application of the review system to school fees because, he said, school fee increases had always been linked with major initiatives in educational expansion. This view was not accepted by the Deputy Financial Secretary and in October 1984 the Director of Education began to review the level of school fees and it took 20 months to prepare proposals for submission to the Executive Council. In July 1986 the Governor in Council approved, as an interim measure, increases in school fees that will restore fees to their 1978 values over a five-year period ending in 1990–91. On completion of the five-year period the additional revenue accruing to the Government was estimated at $71 million a year. Therefore, the Government's past failure to review school fees at regular intervals has meant that substantial revenue has been forgone against a background of large increases in expenditure on senior secondary education. In the six-year period from 1980 to 1986 the average annual cost of a place in Form 6 rose from $7,000 to $13,000 whilst the fee remained at $800 a year. The Secretary for Education and Manpower recently explained that it was unfortunate that a new scale of fees could not be introduced at an earlier stage but this was due to the considerable uncertainty after September 1982 (when the phasing-in of the 1979 round of school fee increases was completed) about the future direction of the secondary education system which made it difficult to take a firm view on appropriate fee levels.
16. Whilst the decision to restore the level of school fees to their 1978 values will make an important contribution towards the Government's expenditure commitment to education, I have invited the attention of the Secretary for Education and Manpower and of the Director of Education to two important matters of policy that remain to be settled namely:
-formulating criteria for determining school fee levels; and
-the frequency with which school fees should be reviewed once the present five-year programme of fee increases is
completed.
The Secretary said that it was generally agreed that school fees should be reviewed annually and that this, and the question of establishing criteria for determining school fee levels, would be considered further in the near future and the advice of the Education Commission sought. It was hoped that when the current programme of fee increases was completed in 1990–91 a clearly defined policy would be in place. The Deputy Financial Secretary had added his support to the need to develop a rationale for the level of school fees that should be charged, based either on a proportion of cost or on the ability of the public to pay.
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