TNAG-2677-FCO40-3874-Hong-Kong-garrison-withdrawal-plan-1993 — Page 116

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8.

Let me map out the scenarios. If we cannot resolve the question of

income tax by the end of this year, there will be a great danger that the

dispute will become public. Questions would be raised in Legislative

Council. The prospect of getting even $1350 million in the 1994-95 Draft

Estimates would be seriously jeopardiced. The Governor would be put

in an impossible position and HMG characterized as the villain,

however unfair this might be. LegCo will simply be bloody minded on

grounds that UKG has been unfair in charging income tax to the DCA

and has thus breached the terms of the DCA. Many LegCo members

will believe they have all the popularity to gain and nothing to lose in

taking such lines. They do not accept the justification of maintaining a

British garrison in Hong Kong. In their way of looking at things, the

Garrison cannot defend us against China, it is costly and it creates an

unpopular mirror-image for the Chinese to insert a sizable PLA after

1997.

9.

Another scenario is the re-negotiation of the DCA. In my view, this

approach has no redeeming features for UKG. Anything could happen