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(e) Gas and Electricity Companies. These companies have de facto but not legal monopolies, the Gas Company in the whole Colony and the two Electric Companies on the island and the mainland respectively. They pay no royalties to Government and their charges are at present unregulated. We feel that they might legitimately be called upon to pay a reasonable royalty for their de facto privileges which could then be made de jure, and to submit to a regulation of charges; and that such a requirement could not be objected to as unduly prejudicing shareholders in these companies. It is not for this Committee to work out any detailed scheme, which would require negotiation with the companies, but as a basic principle we recommend a royalty calculat- ed with relation to profits in excess of some agreed minimum return on capital; the latter would of course be adjusted to the true value of the companies' undertakings and would not necessarily correspond to issued capital.
(f) Taxi Companies. We have discussed at some length with the Honourable Commissioner of Police the possible conversion of the taxi services into mono- polies on public utility lines, paying royalties to Government, and we consider that this is to be recommended in respect of the taxis which ply for hire on the streets, but that other public cars should not be so
so controlled. The .establishment of such a monopoly would require various safe-guards both for Government, for the maintenance of an efficient service to the public and for the companies. An extended system of inspection would probably be necessary. We suggest that tenders should be called for, as a preliminary step, after which the final terms of such a scheme could be considered more effectively. Some increase in the licence fees of public vehicles not plying for hire on the streets would probably be necessary to maintain equality of treatment between them and the taxis.
(g) Transport Companies (Buses, trams and ferries). We consider that the present arrangements should be left undisturbed. We observe, however, that the Tramways royalty will increase to 25% of the company's working profits in the near future and that the royalties payable by the Ferry Companies are already increasing.
(h) Wharf Companies and other harbour interests. We consider that these should not at present be regarded as public utilities subject to any special taxation as in the case of other utilities which are in the possession of legal or actual monopoly privileges. The question may arise in the future if any form of Harbour Trust should be set up, but our opinion is that the possibility of securing additional revenue from the harbour interests should be sub- ordinate to the general question of the best future commercial development of the harbour, a question which Government has already announced its intention to investigate in the near future.
Import Duties.
(i) Import Duties. We consider that the duties on Liquor and Motor Spirit could be increased. The reaction of such an increase upon consumption has been considered, and we do not believe that a small addition to the present level of the tax should affect consumption adversely to such an extent as to reduce materially the resultant gain to revenue. Additional revenue might equitably be found here with little extra expenditure. The cost of collection of such forms of indirect taxation is relatively low, seven million dollars having been collected in 1937 at a cost to Government, as nearly as possible attributable to this head of revenue, of $300,000. An increase of up to $1,000,000 per annum might be secured from the duties on liquor and motor spirit. We have taken note of the recent decision to tax Diesel Engine fuel equally with petrol.
Rates.
C. Suggestions for Major Increases.
(a) The "assessment" or urban rate, which at present stands as 17%, yields annually about $6,000,000 or about of the total Colonial revenue. The present rate is lower than that cbtaining in Shanghai or in Singapore. 2% is, however, earmarked as water revenue and the amount strictly available for general purposes is approximately $5,300,000.