THE Government's decision to set up a three-man review committee to consider whether the Governor Mr Chris Patten should pay tax on his salary raises several issues. If the panel says he should pay up - and Mr Patten accepts that decision - should he be allowed to renegotiate his ''tax-free'' remuneration package, even though there were apparently no negotiations in the first instance, Mr Patten simply accepting the job with the assigned package? Such ''free of tax'' packages are not peculiar to the post of Governor of Hongkong and many major employers, hongs included, have for many years remunerated expatriate staff in this manner. They have thereby borne the cost of the employee's tax as an additional ''perk''. Arguably, Mr Patten's salary is nothing more than a ''free of tax'' package with the added element that there is no requirement to pay tax therein, as this would merely be transferring money from one government pocket to another. It is, in any event, a somewhat disingenuous employer who agrees to a remuneration package and then, within 12 months, seeks to change the terms. If any other employer in Hongkong tried to do that, it is almost certain that the courts, or the Labour Tribunal, would become involved. Of course, Mr Patten may simply accept the revised and effectively reduced package as a good and loyal employee - as indeed employees sometimes do when facing redundancy in perhaps difficult economic times. However, that does not reflect well on the employer, and it would be hard to argue that this particular employer is facing hard times. Whether Mr Patten's package is over-generous is a separate issue and one to be addressed properly by a salary and benefits specialist, rather than a tax specialist. However, there will be few comparisons available around the world to give an indication of the ''going rate'' for a Governor's salary, and the special circumstances of Hongkong would probably make any such comparisons invidious. If Mr Patten becomes taxable on his income, will he then be allowed to avail himself of any of the tax planning techniques often used by highly-paid individuals - or will the Inland Revenue Department clamp down hard on the use of service companies, pension funds, educational trusts or salary sacrifice arrangements? Most commentators have simply looked at the potential tax payable on the cash element of his salary, a flat 15 per cent plus the additional 10 per cent surcharge in respect of accommodation provided. But the question of how Mr Patten would be taxed also raises interesting issues; Tax on a second residence; Tax on entertaining allowances; Private travel arrangements; Gifts from visiting dignitaries (if he keeps them); Educational allowances entitlement and tax thereon. Will Mr Patten as a fully fledged and taxable civil servant be entitled to claim overseas and/or local educational allowances? Such are also taxable if received. Are the quarters provided really a place of residence at all, or the workplace itself? Does he in effect sleep above the office or does the benefit of Government House plus a lodge at Fanling amount to a perk which exceeds the term ''place of residence?'' Are they, in fact, two places of residence, each attracting a separate 10 per cent residence surcharge, so subjecting Mr Patten to tax of 15 per cent on 20 per cent of his salary for the benefit? Entertainment allowances received by Mr Patten (and this applies to all civil servants and Legco members who receive them) of nearly $500,000, are clearly taxable emoluments (to which 20 per cent would be added because of the dual residences). On the other hand, the question of the deductibility of any such entertainment expenses is fraught with problems. The rules on salaries tax deductions are notoriously narrow - ask any taxpayer who has tried to make a claim in his Salaries Tax Return. The law is quite clear, the practice less so. Even if entertaining ex-presidents and ex-prime ministers is a proper expense, is there a personal element to be taken into consideration? Are these dual-purpose expenditures? LOTS of issues are to be clarified, and the treatment afforded to the Governor must match that given to all other taxpayers (if we are to implement the sort of taxpayer's charter that Mr Patten spoke of in his inaugural address to Legco last October and which was modelled on the UK Citizen's Charter concept). Finally, but possibly most significantly, any assessor faced with calculating the Governor's tax bill would have to address the source of his employment. Is the office of Governor akin to that of a director of a Hongkong company and so Hongkong-sourced and wholly taxable, regardless of where the duties are performed? Or is his appointment by the Queen one of secondment from the UK Cabinet (although not an MP, he could still have been employed in the Cabinet) and thus the real source is in the UK and his duties outside Hongkong are non-taxable - it would be an interesting time-apportionment case. The review committee has a lot on its hands to unravel all the potential issues which could arise. Surely the last thing we wish to see is an imprecise tax arrangement which does not conform to our law. If he is to be taxed, Mr Patten should be taxed according to the law and not merely by reference to amounts that are perceived as being the correct, or just, amounts. Salaries tax, as indeed with all taxes in Hongkong, is relatively simple, but for the unwary or the unknowing there can be horrendous complications. I am sure the review committee members are well aware that. Take your time gentlemen.