Tuesday, June 19, 2012 | By: Rudi Butt

Top Taxpayers Now And Then -- Mostly Then


Updated (partial) on 9/4/2012

Seventy nine million Hong Kong dollars was the amount paid by the top taxpayer in 2012, who earned 170 million the year before, of which 157 million was a bonus. Inland Revenue Department does not, as a practice, disclose identities of taxpayers, but news media have singled out Canning Fok Kin-ning 霍建寧 (b.1951, Hong Kong- ) as our man. Fok is the group managing director of Hutchison Whampao, a part of the Li Ka-shing 李嘉誠 empire. Li, 83, the ninth richest man in the world with a net worth of US$25.5 billion, himself pays, in proportion, very little personal income tax. Surely 79 million is a lot of tax to pay, but it isn't anywhere near the record high, which was set in fiscal 2005-06, when Hong Kong was enjoying a property boom. The top taxpayer parted with $101 million, and without a challenge, he was crowned King of Employee 打工皇帝, or King of Salary-men as my Japanese friends would refer him to. Was it Fok? I don't have a clue, but Fok has been reckoned the King by Hong Kong media as far back as fiscal 2001-02.

Income tax has a relatively short history in Hong Kong of just over 72 years. The Hong Kong government was required by the Home government to raise money for its war chest in late 1930s when war in Europe became imminent. The government proposed in 1939, as a solution to the repatriation requirement, an income tax that would cover world-wide income of Hong Kong inhabitants as well as income derived from Hong Kong by non-residents. The proposal was severely opposed by the business community, particularly among the Chinese. Governor Geoffrey Alexander Stafford Northcote 羅富國 took a soft landing approach to tackle the situation. He appointed some of the most vocal businessmen to be members of a new committee he established on October 18, 1939, namely, the War Revenue Committee [1] 戰時收益委員會 and tasked it to develop a tax plan most likely would be acceptable by both the taxer and potential taxees. The Committee went to work and on February 14, 1940 submitted their report, proposing a three-part program: 1.) a property tax to be charged on the rental value of property; 2.) a salary tax to be charged on income from employment; and 3). a profit tax to be charged on the profits of business; all based on the source principle. The program was, as an expedient measure, accepted by the government with slight modifications. Accordingly, Ordinance No.13 of 1940. entitled “The War Revenue Ordinance, 1940” was enacted on August 29, 1940. In the following year an interest tax was added to the original three components. As mentioned just now, the program was accepted as an expedient measure to meet the wartime needs, the government's plan was to introduce a normal income tax to replace the businessmen tax program. That, time has told us, was merely wishful thinking on the part of the government.
[1] The War Revenue Committee was composed of 16 members (having an even number of members seems odd to me) and chaired by Chaloner Grenville Alabaster, the Attorney General. There were four government officials, three lawyers (from the private sector), three trading house men, two bankers, two scholars, one representative of the Chinese Chamber of Commerce, and one chartered accountant. Three of them had seats at both the Executive and Legislative Councils, another four were members of the Legislative Council. Five were Chinese. Below is a roster of members of the committee.
Members of the War Revenue Committee

 Name
Affiliation
Chaloner Grenville Alabaster 晏禮伯 (Chairman), EC, LC Attorney General
Sydney Caine 金錫儀, EC, LC Finanical Secretary
Henry R. Butters 畢打士, EC, LC Finanical Secretary (succeeded Caine on 12/8/1939)
Lo Man-kam 羅文錦, LC Solicitor
Leo D'Almada e Castro, Jr. LC Barrister-at-law
Li Tse-fong 李子方, LC Manager, The Bank of East Asia, Ltd.
W.N. Thomas Tam 譚雅士, LC Barrister-at-law
Vandeleur Molyneux Grayburn 祁禮賓 Chief Manager, HSBC
Duncan John Sloss 史樂詩 Vice-Chancellor, University of Hong Kong
David F. Landale Director, Jardine, Matheson & Co., Ltd.
R. Robertson Professor of Economics and Political Science, University of Hong Kong
Lawrence Kadoorie Partner, Sir Elly Kadoorie & Sons
Eric MacDonald Bryden Chartered Accountant; Partner, Lowe, Bingham and Matthews
Ng Chak-wa Vice-Chairman, Chinese Chamber of Commerce, Hong Kong
T. Black Accountant-General, Hong Kong
Ronald Ruskin Todd 杜德 (Secretary) Assistant Financial Secretary
Names are listed in the order as they were published by the government.
EC: Executive Council; LC: Legislative Council
As an ad hoc committee, the War Revenue Committee was dissolved soon after the tax program they developed was accepted by the government. A small panel was established instead to assist the governor to oversee the war tax matters. On May 1, 1940, three lawyers and an accountant were appointed to Board of War Taxation, and they were John Alexander Fraser 傅瑞憲 (Assistant Attorney General), Lo Man-Kam, George Gwinnett Noble Tinson (a partner of Johnson, Stokes & Masters, Solicitors 孖士打律師行) and Eric MacDonald Bryden. Lo and Bryden were both in the War Revenue Committee. Arthur Grenfell Clarke 祈樂嘉, who was previously with the District Office, was appointed Assistant Commissioner of War Taxation in 1940, and became the Commissioner in 1941. Clarke went on to become the Financial Secretary in 1952 and was appointed Chairman of the First Inland Revenue Ordinance Review Committee established by Governor Alexander Granthan 葛量洪 in the smae year. Other related appointments in 1940 had included: Philip Appleyard as an Examiner (May 31, 1940), Charles William Tresise to the same position (June 4, 1940), and Douglas Harvey Collins Taylor as Clerk to the Board of Review.

In late 1870s and early 1880s, according to the Governor's Report on the Blue Book [3] signed by John Pope Hennessy in 1881, government revenue [2] was chiefly generated from house taxes, government opium monopoly, Crown rents, stamps, postages, taxes on shipping, licenses for the manufacture and sale of spirits, and various fees under the Emigration, Shipping and Registration Ordinances. Of these, the largest two items were house taxes and opium monopoly, each contributed to roughly 22% of the total revenue, or half of the government income when combined. 90% of government tax was paid by the Chinese inhabitants, which, said the report, at any time soon would go as high up as 98%. I don't have the 1882, or 1883, numbers to verify that; what I do have is a list of the top twenty taxpayers in 1881, and one dated five year back. It showed that (in the 1881 listing) there were only three non-Chinese entities: #3 Jardine Matheson, #17 Douglas Lapraik & Co., and #19 D. Sassoon, Sons & Co, whose combined contribution amounted to 14% of the aggregate sum of the lot.


 
1876
 
1881
 
1 Douglas, Lapraik & Co.
$11,108
Wo Hang
$11,398
2 Jardine, Matheson & Co.
8,453
Ng Sang
10,240
3 Kwok A-cheong
6,906
Jardine, Matheson & Co.
7,544
4 T.G. Linstead
6,528
Yeong Shu-lum
6,877
5 Siemssen & Co.
6,305
Lum Sow
6,004
6 Turner & Co.
5,914
Ho Lai-shi
5,863
7 D. Sassoon, Sons & Co.
5,499
Kwok Ying-kai
5,748
8 J.J. Dos Remedios & Co.
4,973
Ching Sing-yeong
5,730
9 Lum Sow
4,475
Lo Shing
5,624
10 HSBC
3,938
Ng Cheong
5,363
11 Wo Hang
3,373
Yeong A-mow
4,968
12 Lee Shing
3,155
Tang Leek
4,748
13 Choy Chan
2,988
Kowk Ying-shew
4,700
14 Coore Lind & Co.
2,965
Low Cheong
4,691
15 Chao Ying-yoong
2,585
Koo Mun-wa
4,597
16 Ng Sang
2,572
Ip Ching-chuen
4,516
17 W. Curtis
2,467
Douglas, Lapraik & Co.
4,473
18 J. Gerrard
2,261
Choy Chan
4,049
19 Yeong Shu-lum
2,212
D. Sassoon, Sons & Co.
4,021
20   Gibb, Livingston & Co.
2,110
Fung Wing
3,996
  
90,787
 
115,150
Source: Gt. Brit. SP. 1882 (44):287
[2] The government had collected $375,112.39 in revenue in 1881, about 31% of which came from the top 20 taxpayers. Government expenditure for the same year amounted to $258,162.43. [3] The Blue Book was a part of the annual reports that had to be sent back to London by the colonial government; it was a collection of all available statistics for Hong Kong, with details of all income and expenditure.
Tax the Vices Vices are addictive. People who run businesses to satisfy others' addictions are hugely profitable. Governments like (to milk) very profitable enterprises, and since governments make rules, they legalize operations of vices providers so they can be taxed. Clearly, this is a simple logic anyone can understand. Around 7% [4] of all taxes paid to the Hong Kong government came from the Hong Kong Jockey Club, which in 2010 paid HK$1.64 billion through direct and indirect taxes, and took the honor of being Hong Kong's single largest taxpayer. For me to go on further, I need to add a preamble here to say that I assume horse racing betting is a vice. Vice, by my definition, means an immoral act practiced by a sane person whilst in normal state of conscious awareness. Some, HKJC for instance, would say otherwise. And, along came cleverly invented jargon such as irresponsible gamblers, problem gamblers, and even pathological gamblers (I hope no such thing as anatomic pathological gambling would ever be dreamed up, or it would fate gamblers to be cut open so as to sort out the punters from the plungers). So you see, for the convenience of stakeholders, a vice could be skillfully repackaged as a mental illness. (And, why not, Tiger Woods did exactly that – a philanderer transformed into a mental patient of hypersexuality, which, as I've come to learn, is a bipolar disorder.) No self respecting government would openly allow immoral conducts to popularize of its own making; but the same government would, and should, and is expected to take proactive steps to “manage” illnesses. Here's how -- by monopolizing them to achieve best control. Metaphorically speaking, you are not allowed to contract flu unless the virus comes from a government authorized provider. Does it make good sense? Of course it does, ask the members of the Legislative Council who met on January 1, 1932 and voted in favor of passing the Betting Duty Ordinance, 1931. I haven't found the minutes of that meeting, so I am not able to tell you who they were at this point.
[4] 11.7% in 2002, 9.7% in 2005, 10% in 2009, 7.6% in 2010.
Gambling was outlawed in Hong Kong on June 10, 1844 upon the enactment of Ordinance No.14 of 1844, which was named “An Ordinance for the suppression of public gaming in the Colony of Hongkong”; and such ban remains today although the original ordinance had long been repealed (in 1876) and replaced by new ones. The monopolies granted to HKJC to run horse racing betting, lotteries and football betting are the only exceptions [5]. When authorizing certain gambling activities, the government says there are requirements which must be met: 1.) there has been sufficient large and persistent public demand for that type of gambling; 2.) the demand is now being satisfied by illegal means. In addition, the problem cannot practically and fully be tackled by law enforcement alone even with the devotion of substantial resources; and 3.) the proposition of authorizing the new gambling outlet commands public support. By public support, do they mean "punteral" support, and I don't mean Punteral in Venezuela.
[5]
The latest authorized gambling activity was football betting. After three separate readings, the Betting Duty (Amendment) Bill 2003 was put to the vote at the Legislative Council on July 10, 2003, where 30 members voted YEH versus 24 NEH. It was absurd that the authorization for football betting was given despite an expert study [6] in 2002 told the Home Affairs Bureau 民政事務局, which funded the study, that, “158,221 to 242,353 Hong Kong residents (ages 15-64 years) could be classified as problem gamblers, whereas 65,171 to 116,523 residents can be categorized as probable pathological gamblers”. HKJC, who had been lobbying the government for the Bill, was granted a five-year monopoly, renewable subject to the approval of none other than the Secretary for Home Affairs. 50% of the gross profit of the betting operation goes to the government as tax. Additionally, HKJC was to pay $24 million during the first two years of the monopoly, and thereafter HK$12 million to $15 million each year to fund the research, studies, counseling and treatment of pathological gamblers [7]. In May 2004, HKJC released some mind boggling figures taken during the eight-month period next following the authorization of football betting. The HKJC online betting accounts surged from 35,000 to 95,000 while the number of telebet betting (phone betting) accounts has gone up by 200,000 and past the one million level. This benchmark of one million in 2004 meant one in five adults in Hong Kong would be a holder of a telebet account. I am most certain it would set a Guinness World Record, if someone were to submit them to Guinness. HKJC, clearly, wouldn't be keen on doing just that. Anyways, I should perhaps leave the subject of legalized gambling for another day, say when I am particularly cynical, and get back to discussing taxpayers.
[6] The survey on Prevalence of Problem and Pathological Gambling in Hong Kong was carried out in 2001 by Irene Lai-kuen Wong, Ph.D. 黄麗娟, Assistant Professor, Department of Applied Social Sciences, Hong Kong Polytechnic University, and Ernest M.T. So (no information about who So is). The study, following the DSM-IV (Diagnostic and Statistical Manual of Mental Disorders, 4th Edition) Criteria and based on a sample size of 2,004, showed the results of 4.0% and 1.8% of the respondents could be classified as problem and pathological gamblers respectively (lifetime). Wong and So were commissioned by the Home Affairs Bureau to carry out the survey. I was able to find some data on prevalence rate of probable pathological gambling in some nations, they were results of surveys conducted between 1998 and 2010 by different agencies and by using different criteria / methods, viz. SOGS, DSM-IV and Meta Analysis. Due to the time and methodology discrepancies, these numbers, as I've assembled them below, are only good as anecdotal notes to stick on the world map of pathological gambling, but not so as a base to make a ranking comparison. Here goes: Puerto Rico 7.4%, The United States 1.5% to 5.1%, Australia 2.1% to 5%, France 1% to 2%, South Africa 1.8%, Canada 1.6%, Japan 1.5%, Switzerland 0.2% to 0.8%, Britain 0.3% to 0.8%, Iceland 0.6%, Sweden 0.3% to 0.6%, New Zealand 0.5%, Norway 0.2% to 0.3%, Denmark 0.1%. [7] $24 million divided by 116,523 means each pathological gambler gets exactly $206 (US$26) a year to treat his / her gambling illness, the same amount a gp doctor in Hong Kong would charge for a single consultation, let say to treat your flu; provided further that we save all the money to treat pathological gamblers and leave the problem gamblers to rot.
Brief biographies of selected persons featured in this post. Chaloner Grenville Alabaster 晏禮伯 Chairman, War Revenue Committee, 1939-1940 Alabaster (b.1880-d.1958) and his father had identical names. His father was a diplomat stationed in China from 1855 to 1891, rising from an interpreter to British Consul General in Canton (1891, Consul since 1886). Alabaster 阿查理, the father, was a Freemason. He was made an K.C.M.G. in 1892, the year next following his departure from China. Alabaster, the son, was a barrister-at-law called in the Inner Temple, London in June 1904. He was admitted to practice in Hong Kong in 1909, the year he married Mabel Winifred Mary Mainwaring (b.1882-d.1951), daughter of Colonel E.P. Mainwaring of the Indian Army, in Canton (Guangzhou). Alabaster acted as deputy Cable Censor during the Great War, and for that he was awarded an O.B.E. His wife, M.W.M Mainwaring, received an M.B.E. in 1928 for services for the welfare of the troops in Hong Kong. Alabaster was appointed acting Attorney General in multiple occasions in 1911, 1922 and 1928. He became a member of the Legislative Council on April 10, 1919, and serve in the Law Committee. Alabaster was appointed a King's Counsel in Hong Kong on September 9, 1922, and had also served in the Sanitary Board for many years. He was elected president of the Hong Kong branch of the Royal Society of St. George for 1927-28. He was appointed Attorney General of Hong Kong on April 9, 1930 and held the position until his was interned in the Stanley Interment Camp during the Japanese occupation. I could not find the names of his wife and daughter, Dorethea Rosalie, from the roster of internees; they probably were in Britain. He was repatriated in 1945 and retired in Britain in 1946. Alabaster was a vocal advocate for anti-miscegenation eugenics, and had repeatedly pressed the government to impose laws declaring marriage between certain races invalid or a punishable offense. At the end, none of his recommendations were implemented. References for this biography: - Bashford, Alison and Levine, Philippa (Ed.), The Oxford Handbook of the History of Eugenics, Oxford: Oxford University Press, 2010. - Edinburgh Gazette, June 8, 1928. - Poy, Vivienne, Profit, Victory & Sharpness: the Lees of Hong Kong, York: York Center for Asian Research, York University, 2006. - Proceedings of Meeting, the Legislative Council, Hong Kong, April 20, 1911; July 20, 1911; April 10, 1919; March 19, 1931; and March 17, 1932. - The Singapore Free Press and Mercantile Advertiser, February 22, 1909; and September 23, 1922. - The Straits Times, October 11, 1928. William Ngar Tse Thomas Tam 譚雅士 Member, War Revenue Committee, 1939-1940 W.N. Thomas Tam (b.1906-d.1979) was a barrister-at-law admitted to practice in Hong Kong. He was Chairman of the Board of Po Leung Kuk 保良局 in 1936 and 1937, and had been a member of the Legislative Council from March 1939 until Hong Kong fell to the Japanese in 1941. During the Japanese occupation, Tam was appointed by the Chinese Representative Council 華民代表會 to sit in the Chinese Cooperative Council 香港華民各界協議會 as a member. The former was composed of four members: Robert Hormus Kotewall, alias Lo Yuk-wo, 羅旭龢 (chairman),  Lau Tit-shing 劉鐵成, Li Tse-fong 李子方 and Chan Lim-pak 陳廉伯; the latter was composed of 22 members. These puppet consultation bodies were established by the Japanese occupation government as cosmetics to adorn its ruthless governance. Tam also sat on the Chinese Rehabilitation Committee 香港善後處理委員會, which was instrumental in keeping the city running after the colonial  Hong Kong government ceased to function (exist), coping with the water, energy and food stresses to the least. A number of civic Chinese leaders previously close to the colonial government, as I have read, aligned themselves with the Japanese with the prior consent of the British government; their aim -- to maximize the prospect of stability, however small that prospect was, in Hong Kong during enemy occupation. Tam was probably one of them as I found no recorded that indicated he was punished after the war for being an enemy collaborator. Tam was appointed a Justice of the Peace and was awarded an O.B.E. (effective dates unknown to me). He was made a judge of the Central Magistracy 中央裁判司署 in 1947, and elected a member of the Court of the Hong Kong University in 1954. Tam was married to Jessie To 杜佩珍 (it's a pity I haven't been able to find ancestral information of Tam and To). Their daughter Eileen Barbara Tam 譚愛蓮 (b. unknown – d. June 24, 2006) married Yang Ti-liang 楊鐵樑 (b. June 30, 1929 - ), colonial Hong Kong's last chief justice, and, significantly, the first ethnic Chinese to be appointed (1988-1996). Tam and his wife had been benefactors in many charities, education and children welfare organizations in particular. The Jessie and Thomas Tam Charitable Foundation 譚雅士杜佩珍基金會, established in their names in 1988, still gives generous today. References for this biography: - Caroll, John M., A Concise History of Hong Kong, Lanham, Maryland: Rowman & Littlefield Publishers, Inc., 2007. - Historic Building Appraisal, No.128 Pok Fu Lam Road, Hong Kong, Antiquities and Monuments Office, Hong Kong Government [internet]. - Proceedings of the Legislative Council, March 3, 1939.
Ho Mui-ling,
 daughter of Ho Lai-shi
Ho Lai-shi 何黎氏 No.6 in the top taxpayer ranking, 1881 Ho Lai-shi was the widow of the Rev. Ho Fuk-tong 何福堂, the first Chinese Protestant minister in Hong Kong. (The Rev.) Ho began investing in land in Hong Kong in 1846 while he was still studying theology under Scottish missionary James Legge 理雅各. By the time he died in 1871, his estate was sworn at over HK$100,000, which amounted to about a quarter of what the Hong Kong and Shanghai Banking Corporation made as profit for the same year. The couple had eleven children, among them were Ho Shan-kai, 何神啟, alias Ho Kai 何啟, the most prominent, and Westernized, Chinese inhabitant of his time and the first to marry a British woman, Alice Walkden; and Ho Miu-ling 何妙齡, who married the reputed politician / entrepreneur Ng Choy 伍才, alias Wu Tingfang 伍廷芳. Unfortunately, there was almost nothing written about Ho Lai-shi other than her tax payment ranking. A substantial amount of assignments of her land holdings probably took place in fiscal 1880-81, hence the large tax payment of close to $6,000. Incidentally, she was the first woman taxpayer in Hong Kong to be listed. I don't have a picture of Ho Lai-shi, but have one of her daughter, Ho Miu-ling. Anyone interested in learning more about the Rev. Ho Fuk-tong and his family may read a story I wrote back in 2010, entitled "Ho Fuk-tong, Father of all Doctors".
- TO BE COMPLETED -
References for the post: - Balfour, Frederik, 'Gaming for Hong Kong's Jockey Club, the Race is Online', Bloomberg Businessweek, February 17, 2011. - Caroll, John M., A Concise History of Hong Kong, Lanham, Maryland: Rowman & Littlefield Publishers, Inc., 2007. - Global Times, November 4, 2009. - The Governor's Report on the Blue Book, Hong Kong, April 29, 1881. - The Hong Kong Government Gazette, May 3, 1940; June 7, 1940; November 8, 1940; December 13, 1940; May 16, 1941; July 11, 1941. - Hong Kong Asia City, Hong Kong Venue, Hong Kong Jockey Club [internet]. - Littlewood, Michael, 'The Hong Kong Tax System: its History, its Future and the Lessons it Holds for the rest of the World', Hong Kong Law Journal, 2010. - Littlewood, Michael, Taxation without Representation, the History of Hong Kong's Troublingly Successful Tax System, Hong Kong: Hong Kong University Press, 2010. - London and China Mail, March 20, 1882. - Moy, Patsy, 'Top taxpayer puts $91m into public purse', The Standard, Top News, May 06, 2010. - Policy Models Rational Decision Making Model Case Study of Soccer Betting in Hong Kong, benaston.com [internet]. - Pomerantz-Zhang, Linda, Wu Tingfang (1842-1922): Reform and Modernization in Modern Chinese History, Hong Kong: Hong Kong University Press, 1992. - Proceedings of the Legislative Council Meeting, Hong Kong, May 19,2004. - Ure, Gavin,Governors, Politics and the Colonial Office: Public Policy in Hong Kong, 1918-58, Hong  Kong: Hong Kong University Press, 2012. - Wong, Irene L.K. And So, Ernest M.T., 'Prevalence Estimates of Problem and Pathological Gambling in Hong Kong', The American Journal of Psychiatry, July 1, 2003. - Wong, Olga, 'Biggest taxpayer forks out HK$79m', South China Morning Post, HK News Watch, May 5, 2012.

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