Sessional_Paper_1940 — Page 11

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REPORT OF THE WAR REVENUE COMMITTEE.

Chapter I.

Terms of Reference.

The Committee was originally appointed to examine and advise on the detailed provisions of a draft Income Tax Bill, based on the Ceylon Income Tax Ordin- ance of 1932, which had been prepared by Government after His Excellency the Governor's announcement in the Legislative Council on 12th October, 1939, that Government proposed to raise new revenue for war purposes by means of an Income Tax. Later, in view of the opposition to Government's proposal, which was voiced by the Unofficial Members at the meetings of the Legislative Council on the 9th and 16th November, 1939, and because it was felt that the principle of an Income Tax for this Colony and the possibility of raising additional revenue by alternative means were matters which should properly come within the purview of the Committee, the terms of reference were extended. The full terms of reference then became :-

(1) To examine the draft Income Tax Bill and advise on the detailed provisions which would be desirable in such a measure if it were adopted, having regard to the special circumstances of this Colony; and

(2) to advise whether the best method of raising additional revenue for war purposes would be such an Income Tax or, alternatively, any other measure or measures of taxation of which the incidence would be on substantially the same classes of the community as an Income Tax and which could not be passed on to the poorer classes.

Chapter II.

Details of Meetings, Procedure, etc.

1. Eleven meetings of the full Committee were held between 3rd November, 1939, and 24th January, 1940, and in addition there were several sub-committee meet- ings. The Honourable Mr. S. Caine, Financial Secretary, resigned from the Committee. on his departure from the Colony on 6th December, 1939. The Honourable Mr. H. R. Butters, Financial Secretary, and Mr. T. Black, Accountant-General, were appointed to the Committee on 8th December, 1939.

2. We examined in the first place the draft of an Income Tax Bill, which had been prepared by the Chairman and the Financial Secretary on the model of the Ceylon Income Tax Ordinance of 1932.

3. Early in our deliberations it became apparent that to impose an Income Tax on the profits, wherever made, of companies in this Colony would be unsatis- factory in that many shareholders of local companies reside in Great Britain or the Dominions and relief could be claimed by such shareholders in respect of Hong Kong Income Tax from their assessments to United Kingdom or Dominion Income Tax. The revenue which it is proposed to raise is for the purpose of a contribution by the Colony to the Imperial war effort and obviously such a purpose could not be fulfilled if part of this revenue were, in fact, to be contributed by the United Kingdom or Dominion Exchequers in the form of such relief to shareholders in respect of profits not earned from transactions in the Colony,

4. Before this examination of the draft Income Tax Bill was completed, however, our terms of reference were widened, as stated in Chapter I, and we therefore turned to the consideration of alternative taxes. We examined a great many suggestions including those put forward by the Honourable Sir Henry Pollock in his speech in the Legislative Council on 9th November, 1939, additional sugges- tions submitted by the Honourable Mr. W. N. Thomas Tam and an analysis of