C. 92622/32 [No. 8].
No.
PROOF.
DEAR CALDER,
MR. G. D. ROSEWAY (WAR Office)
to
MR J. A. CALDER (COLONIAL Office).
The War Office, London, S.W.1, 21st September, 1932. WITH reference to your official letter dated 19th August, 1932,* on the subject. of the Hong Kong contribution, there would still appear to be some misunderstanding regarding the question of the treatment of profits arising on the sale of securities which is dealt with in paragraph 11.
In paragraphs 10 and 11 of our letter of the 25th April, 1932,† we agreed that any appreciation in the value of invested securities which might be included in the revenue as a result of accounting arrangements, i.e., where the Colony in fact received no cash as a result of the appreciation and any military contribution levied on the paper" appreciation would have to be paid from other revenue which had already been subject to military contribution, should be excluded. We argued, however, that in the case of the sale of securities where the Colony actually received cash we are entitled to claim military contribution in respect of any appreciation whether in sterling or dollars except where the securities sold were originally bought from funds arising from the proceeds of land sales.
It was our intention to make clear that in claiming contribution on the increase in the dollar value of sold surplus balance securities, due to depreciation in the value of the dollar, we were claiming no more than is due under paragraph 291 Colonial Regu- lations.
Actually, under this paragraph any profit realized from the sale of every Colonial investment should pay military contribution, but you will see from correspondence between Vernon, Waterfield and Lyon about the end of 1929, that we were content to restrict our entitlement to the profits arising on the sale of investments purchased from the surplus balances of general revenue.
Again, as regards the last sentence of paragraph 11 of your letter our reference in sub-paragraph 2 of paragraph 11 of our letter to the amount involved being small is not to the total increase in the value of all securities due to changes in the value of the dollar but to that part of the increase which arose from the securities purchased from surplus balances. We had agreed in sub-paragraph 1 of paragraph 11 of our letter that any profits (sterling or dollar) arising on the sale of investments bought with the proceeds of land sales are exempted from assessment for military contribution, and as you stated in your official letter of 20th November, 1931,‡ confirmed in your semi- official letter to me of the 6th February, 1932, § same number, that the whole or prac- tically the whole of Hong Kong's investments have been made from the proceeds of land sales, the amount of investments arising from surplus balances must be small and consequently I gathered that you agreed that the dollar profits arising from their sale must be very small.
Our point is that we claim military contribution on any sum included in the revenue arising from increases in value of securities which represent the investment of balances of general revenue (not land sales). The sterling part is covered by Colonial Regula- tions and if the dollar part is small we are prepared to waive it. Therefore, if you still stand by what you said in your letter of 6th February all that is necessary from you to dispose of the outstanding point in connexion with the treatment of revenue arising from appreciation of securities is a confirmation that any increase in the dollar value of sold investments of general balances not already covered by paragraph 291 of the Colonial Regulations can only be very small.
In the circumstances perhaps you would like to reconsider the terms of para- graph 11 of your letter. I shall be happy to talk the point over with you at any time
you think it would help to clear up the matter.
if
* No. C. 92622/32 [No. 5].
Yours, &c.,
G. D. ROSEWAY.
+ No. C. 92622/32 [No. 1].
No. C. 82756/31 [No. 16]
$
Straits Defence Con-Gp. 6. 131/2963. 24. 8/34. (18305) M. & S. Ltd.
82