C. 14661/26.
No.
PROOF.
SIR,
(No. 298.)
HONG KONG.
THE GOVERNOR to THE SECRETARY OF STATE.
(Received 26th July, 1926.)
[Answered by No. C. 22459/26.]
Government House, Hong Kong, 24th June, 1926. I HAVE the honour to address you with reference to the method of assessment by which the amount of military contribution payable by this Colony to His Majesty's Government is ascertained.
2. I am not now concerned with the argument, frequently put forward, that the present method is illogical and unduly burdensome, because, whenever the Government is driven to increase taxation in order to meet necessary expenditure, a further burden equal to 25 per cent. on such increase in taxation is necessary to meet the military contribution payable on the increase in revenue. I am also not now con- cerned with the view, often expressed, that the military contribution has for many years been an unduly heavy drain on the Colony's resources. I am now solely concerned with the very great desirability-I had almost said, the necessity-of arriving at some basis of calculation which will eliminate the constant difficulties and differences of opinion to which the present system of assessment is continually giving rise.
3. You are well aware of the difficulties and discussions which have arisen in the past, but it may be convenient to recall a few of them by way of example.
*
4. The question of the proper method of accounting for the proceeds or value of stores sold, or returned to store, or recovered from a previous work and used again, was discussed at intervals from 1909 to 1922. Upon the method of accounting turned the question of liability to military contribution. In 1909 an unwanted hospital hulk, the Hygeia, was sold for $25,000. The proceeds were at first credited to Miscellaneous Receipts, but were afterwards transferred to the credit of the original head of expense, i.e., Public Works Extraordinary. The latter method of accounting was disapproved by the Secretary of State in his despatch No. 232 of the 20th July, 1912, and the result for the time being was that the proceeds of any such sale paid military contribution a second time. In 1919 a somewhat similar question arose as to the proper method of accounting for certain stores which were recovered from a previous work and used over again. The effect of the decision on this point was to make military contribution payable twice over on the value of such stores so recovered, and apparently the position was the same as regards the sale of condemned stores. This was pointed out and in 1922 the Army Council and Treasury agreed to a mode of accounting which avoids the above result. The point here is that this source of friction and dispute was not settled until 1922. See the Governor's despatch No. 161 of the 19th May, 1919,† the Secretary of State's despatch No. 68 of the 26th February, 1920, the Governor's despatch No. 259 of the 4th July, 1921, § and the Secretary of State's despatch No. 129 of the 29th April, 1922.||
5. It was not until 1910 that it was laid down that refunds of revenue should be deducted from the gross receipts liable to military contribution: see the Secretary of State's despatch No. 116 of the 29th April, 1910.¶
6. One recent instance, on which I propose to address you in a separate despatch, is-the question of whether it can properly be assumed that a profit or loss in exchange is made whenever a sterling investment happens to be sold or a sterling balance in the hands of the Crown Agents happens to be drawn upon. The matter is too complicated to elaborate here, but I think that it can at least be said that considerations are involved which had not been put before you by this Government at the time when you wrote your despatch No. 431 of the 26th November, 1925.** This particular difference of opinion has taken 25 years to come to a head.
7. A question which may soon become acute is that of revenue collected for the service of loans raised for such objects as the construction of waterworks and harbour works. The present Ordinance recognizes the principle of exempting from military contribution revenue raised for the service of loans utilized in the construction of
|| No. 16110/22.
* No. 20848/12. † No. 40080/19.
No. 40080/19.
¶ No. 11667/10.
§ No. 45489/21. ** No. 47207/25.
Straits Defence Con.-Gp. 6. 131/2963. 24. 8/34. (18273) M. & S., Ltd.
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