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e) The claims for the amendment of the present system, reserved by the Governor in the event of the new proposal being rejected, are not fully stated, but they comprise claims for the assessment of net instead of gross receipts and for exemption from assessment of certain revenues hitherto assessed in gross.
These claims, which are far-reaching in their financial effects, raise questions of the treatment of municipal revenues which were fully considered and decided against the Colony in 1895. Hore particularly the claims ignore the principle on which the War Office has always taken its stand, that modifications of the scope of the revenue assessable under the 1895 settlement can only be made if they are accompanied by a revision of the percentage limit on gross revenue. If, however; any individual claims for assessment of net instead of gross receipts are based on sound principles, thei War Office is prepared to examine them. (Paragraphs 10-22).
( 1 ) The claim for concessions on hospital and education revenues calls for notice owing to the departure from the 1895 settlement made in 1909 in this matter by the Straits Settlements under protest from the War Office and the Treasury. (Paragraphs 23-24).
(g) It does not appear that Army Funds are likely to gain from the proposed change in system; on the other hand there seems some reason to apprehend that in future years the yield from the new system might be smaller than that under the present system of 20% of revenue. (Paragraphs 25 and 26).
3. The Army Council would not necessarily resist any proposal for the substitution of an entirely new system for the 1895 settlement if it were clear that the new system would avoid any important disadvantages without sacrificing the advantages of the old system and that Army Funds would not suffer in consequence of the change. The Council are not at present satisfied that these conditions are fulfilled by the proposed levy on rateable value. In any case the issues raised by the Colony's reserved claims under the existing system are so direct a challenge to the principles of the 1895 settlement that the Army Council are unable to agree that they constitute a genuine alternative to the proposed change of system.
4. I am to submit these provisional comments for Their Lordship's consideration in the first instange. Meanwhile, copies of this letter and enclosure have not been sent to the Colonial Office.
I an,
de Sir,
Your obedient Servant,
(Signed) H.J.CREEDY.