TNAG-2195-FCO40-3132-Hong-Kong-nationality-package-1990 — Page 104

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18 April 1990

SH Broadbent

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Mr Paul

Hong Kong Dept

HONG KONG DEBATE:

1.

TAXES

Could I

I have seen the two passages in the draft speech which refer to calculations that we were asked to do on taxes which might be paid by professionals in Hong Kong and in the UK. suggest some modifications in the way this material is used.

2.

In the first section, there are some detailed comparisons for wages of different professional groups in Hong Kong and in the UK and of the amounts of tax they will pay in each place. The general argument seems to be that these people earn much more, and are taxed much less in Hong Kong, and have no possible reason leave except fear of being stuck there if the political situation deteriorates. Hence giving them passports. I would have thought this argument was more effectively made in these terms, and the detailed sums held in reserve if anyone challenges the factual basis of it. As it stands, the point is less clear and thus less effective.

3. The second passage concerns what would happen if the 50,000 actually came here (incidentally, do you really want to say "if the worst came to the worst"?). I am sure that it is right that this would be an economic shot in the arm.

But I think considerable care is required in deploying any figures for possible taxes which might be paid by them. Quoting specific figures will inevitably start an argument about the exact assumptions that are being made and about what offsetting costs to the Exchequer, at least initially. This would detract from your central point, which is a good one. Might it not be better to enlarge on the general proposition with something like: "There is no reason to doubt that having such people in the UK would bring us considerable economic benefits. They would accrue not only to the individuals concerned, but also to our economy at large, as well- dare I say it -

dare I say it as to the Exchequer. Again, much better only to mention a figure if it is dragged out of us; it can then be wrapped around with all the necessary qualifications without interrupting the flow of the argument. I would anyway prefer "several hundred millions" to "£600m" as a first shot.

4. Whilst we have cleared the figures related to individual tax- payers with the Treasury, we have not tried to do so in the case of the overall revenue effects, and I do not think this would be possible. The figures are much too speculative.

S H Broadbent Economic Advisers WH425

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