Time was that Hong Kong could not assent to extend the principle of paying net receipts to receipts from other public undertakings which are altogether different from railways (e.g., character & productiveness).
The Straits percentage was raised from 17½% to 20% in 1899 for a similar reason. The case of Hong Kong is because the cost of liability, defence works, and the cost of building's lands were deferred.
In 1904, the W.O. & Treasury agreed that from the gross revenue of railways and the revenue of the Straits and telephones, there might be deducted not only the working expenses, interest, and sinking fund on moneys borrowed for construction but also the cost of 4% for 50 years construction deferred out of assessable revenue to arrive at the net revenue.
This was a logical extension of what had previously been agreed to, and they did not ask that any change should be made in the percentage.
In taking up the position, W. & S. Ltd. stated that the mode of calculating the military contribution on assessable revenue is altered, and therefore, the percentage must be altered too, assuming the Treasury takes a strong position. They will no doubt take a similar line in reply to Lake Anderson's despatch when they have recovered from the shock which that caused them.
It is certainly very difficult to lay down a satisfactory way of calculating net revenue, excluding appropriations in and from assessable revenue, as a consequence of the principles of the financial system of the Colonies. It would, I think, clearly be to the benefit of the Colonies to calculate the military contribution, whenever possible, on net revenue, even though the percentage had to be raised.
The military contribution thus levied increases faster than the net revenue. This postal agency question is but a small part of it.
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