TNAG-2905-FCO40-4179-Hong-Kong-Governor-1993 — Page 80

CONFIDENTIAL

Private Secretary

The minister was seen this submission and does

not dissent. He felt that the Secretary of State

would also wish to we

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Minister

Secretary State

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12 FEB 1993

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FROM: P F Ricketts

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Hong Kong Department

DATE: 8 February 1993

cc: Sir J Coles

Mr Greenstock Mr Madden, SED

Mr Baker, WIAD

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A3912

HONG KONG: THE GOVERNOR'S TAX POSITION

1.

Pressure is mounting in Hong Kong for the Governor to pay Hong Kong salaries tax. We thought that the Minister would want to be aware of this issue as the Governor may look to us for support.

2. The Prime Minister announced in November 1992 that The Queen had decided to pay tax on Her private investment income from the beginning of the next financial year. We understand that a general description of The Queen's future tax position will be included in the next report of the Royal Trustees, with a Memorandum of Understanding attached to the report setting out the arrangements in detail. The report is likely to be published in mid-February.

3. The Queen's decision has prompted some sections of the public and the press in Hong Kong to raise again the issue of whether the Governor should continue to be exempt from Hong Kong salaries tax. A question on this subject was asked in the Legislative Council on 3 February and received wide coverage in both the Hong Kong and UK press.

4.

In

Although parallels are being drawn in political terms between The Queen's tax position and that of the Governor, in real terms there is no formal link. The Queen has agreed to pay tax on Her investment income, whereas Governors of dependent territories are paid salaries under the terms of a contract. practice, a Governor's tax position is regulated by his local legislature, unless his salary is paid in full or in part by HMG, in which case he is subject to UK income tax. Governors paid by HMG include the Falkland Islands, British Virgin Islands and Anguilla. The Governor of Gibraltar is paid by the Gibraltar Government and is exempt from tax, but receives a fairly modest salary. The Governors of the Cayman Islands and Bermuda do not pay local tax because there is no income tax in those territories.

CONFIDENTIAL