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Er. Roberts-Wray.
I shall be grateful for your advice on the
following points.
A
Hong Kong pays to the Imperial Government a
Defence Contribution of 20 per cent of the Colonial
revenues under Ordinance No.1 of 1901. In the cal-
culation of the Colonial revenues for this purpose
provision is made for the bringing in of net receipts
only on certain productive undertakings, i.e., rail-
ways, telephones or other productive undertakings of
a similar character, established after the passing of
the Ordinance. In the calculation of net receipts
for this purpose a deduction is authorised for
Contilation
interest and sinking funds on any sums raised by
loan and utilised for the construction of such under-
takings, see the first proviso to Section 3 of the
Ordinance.
Provision is also made (second proviso to
Section 3) for the deduction from the gross receipts
from and after the 1st of January, 1911 "in the case
of any railways, telephones, or other productive
undertakings" of 4 per cent on capital expenditure
met from revenue for a period of 50 years.
The Hong Kong Government have recently put
forward a claim that the allowance of 4 per cent
should be made on capital expenditure on Water Works
met out of revenue, such Water Works being undoubtedly
productive undertakings, and therefore, according to
Hong Kong, coming under the second proviso of Section
3. The War Office resist this because they say the
Water Works, although productive undertakings, were
not established after the coming into force of the
Ordinance (see the first proviso), and are therefore
not entitled to be assessed on a net receipts basis
(this