C. 62832/29 [No. 3].
No
TREASURY to COLONIAL OFFICE.
[Answered by No.
]
PROOF.
(S. 33955.) SIR,
Treasury Chambers, 31st July, 1929. THE Lords Commissioners of His Majesty's Treasury have had before Them your letter of the 26th January, 1929,* with enclosures relative to a proposal made by the Governor of Hong Kong for changing the method of assessing the military contribution of Hong Kong.
I am now to request you to inform Secretary Lord Passfield that My Lords have consulted the War Office on this proposal and They desire me to transmit herewith a copy of a letter dated the 25th April, 1929, with enclosure which They have received from that Department.
My Lords after careful consideration find Themselves in general agreement with the conclusion of the Army Council that the proposed substitution of a 122 per cent., levy on rateable value for 20 per cent. of gross revenue as the limit of the contribu- tion (subject as at present to the cost of the garrison not being exceeded) is not only not justified on its own merits but is likely to prove unfavourable to this country. the detailed arguments adduced by the War Office They would only add :---
To
(1) that there is the possibility that the recent gradual fall in the price of silver may continue and that valuations of property may not be adjusted thereto, and while there may be a recovery in the price of silver (though existing indications cannot be said to point in that direction), the fall that has already occurred is in any case likely to be much more fully reflected in the yield of revenue generally than in rateable value; (2) that, while My Lords have not the material to enable Them to make a detailed examination of the figures of revenue and expenditure of the Colony for the years 1925 and onwards, They suspect that the revenue for those years was so much affected by the boycott and the disturbances in China generally that the comparison between actual yield on the present basis of assessment and that under the proposed alternative for those years is of very doubtful value.
Generally My Lords feel that no sufficient case is made out for overturning the present system, which has stood the test of time and has not worked unfairly, in favour of a scheme which is likely to cause the rent-tax percentage to be regarded in fact if not in theory as levied solely for the purpose of the military contribution and not as part of the Colony's general taxation system. With the best will in the world the Colonial Government might well find the pressure in favour of low valuation to be irresistible.
My Lords understand that the Governor contends that the proposed levy of 12 per cent. on rateable value is roughly correct because, although it falls short of 20 per cent. of present gross revenue, it is considerably in advance of 20 per cent. of such revenue with the exemptions held in reserve by the Colony as an alternative claim. As regards this contention, My Lords are in entire agreement with the argument of the War Office that the 20 per cent. figure has always been related to a particular interpretation of "revenue" and would fall to be greatly increased if exemptions on the scale indicated were made.
I am, &c.,
R. V. NIND HOPKINS.
Enclosure in No.
SIR,
25th April, 1929.
I AM commanded by the Army Council to inform you that they have had under consideration two letters from the Colonial Office, dated respectively 12th October, 1928, and 26th January, 1929, copies of which have been sent to the Treasury, relative to a proposal initiated by the Governor of Hong Kong in a despatch dated 24th June, 1926, and developed in further despatches dated 28th July and 1st November, 1928, for changing the method of assessing the military contribution of Hong Kong. Hong Kong now pays the cost of its garrison or 20 per cent. of gross revenue, whichever is
* C. 52802/28 [No. 23]: not printed.
Straits Defence Con.--Gp. 6.
131/2963. 24. 8/34. (18276) M. & S. Ltd.
35