C. 92622/32 [No. 1].
No.
WAR OFFICE to COLONIAL OFFICE.
[Answered by No. C. 92622/32 [No. 5].]
74
PROOF.
SIR,
**
The War Office, London, S.W.1, 25th April, 1932.
I AM commanded by the Army Council to refer to your letter of 20th November, 1931, regarding the exemption from assessment for military contribution or other special treatment of certain items of the revenue of Hong Kong, and to offer for the information of Secretary Sir Philip Cunliffe-Lister the following remarks on the several points raised in the letter.
A.
Wireless Telegraphy.
The Council agree that this undertaking can be regarded as a productive undertaking and subject to assessment on net receipts only. The Council agree, more- over, that in this and other recognized productive undertakings, a case has been established for increasing the rate of allowance in respect of capital expenditure met from revenue, above the 4 per cent. permissible, under the current Military Contribu- tion Ordinance. In view of the data which have been furnished showing the rates of interest at which Colonial Loans have been raised in London since 1915, an allowance of 5 per cent. to cover interest alone would appear to be justified. The corresponding sinking fund allowance for such a rate of interest over a period of 50 years does not, however, exceed per cent., and after full consideration of the arguments adduced by your Department for an increase of the total allowance to 6 per cent., the Council feel that the maximum allowance to be made should not be more than 5 per cent. They are prepared to agree to the adoption of this rate of allowance in respect of capital expenditure on recognized productive undertakings incurred from revenue since 1915 or to be incurred in the future, and to the extension of a similar concession to other Colonies which may be affected. If the rates of interest at which loans are raised should subsequently diminish appreciably, the Council may desire to reopen the question of the rate of allowance for future capital expenditure. The Council agree that the treatment of this allowance, if the wireless telegraphy undertaking is transferred to any other body before the expiration of the period of 50 years, running from 1932, can be left for consideration when such transfer arises.
B. Use of Government Motor Vans.
3. The Council now agree, in the light of the further remarks in your letter, that revenue from this source should be treated on the basis of net receipts.
C. Gap Rock Lighthouse.
4. The Council are prepared to agree, as a special concession in view of the exceptional interest which the Colony apparently take in this clain, despite the trifling amount involved, that this claim shall be wholly excluded from the revenue subject to assessment. It should be clearly understood that this concession is without prejudice to the general principle that no item which was included in assessable revenue when the percentage was fixed can now be excluded without reconsideration of the percentages.'
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D. Anti-piracy Escorts.
F. Overpayments.
5. The Council agree, in view of the remarks in your letter and of the further information which has been furnished as regards Item F., that these items may be wholly excluded from the revenue assessable to military contribution, as being in the nature of reimbursements of special expenditure or accounting adjustments.
E. House Service Account.
6. The Council agree that the revenue from this source should be excluded from assessment, subject, in view of the further information contained in your letter of 29th March, 1932,† to the proviso that if at any time a profit is made on this Account, the profit should be included in the assessable revenue. In order that the point should not be overlooked, it is considered that the items should be treated in the annual statement of assessable revenue on the basis of net receipts.
* No. C. 82756/31 [No. 16].
No. C. 82756/31 [No. 24].
Straits Defence Con.-Gp. 6. 131/2963. 24. 8/34. (18292) M. & S. Ltd.