- 2 -
34
(36)
M
33706
34
No.11 of 1934).
On the other hand the Inscribed Stock was
redeemable at the latest in 1943 while the Dollar Loan will
not be wholly redeemed until 1959.
As stated in paragraphs 4 and 5 of the War Office letter
only the net profits of the Railway are assessable to Military
Contribution and this automatically protects the service of the
loan from paying contribution provided the Railway is paying
its way.
The replacement of a loan service of £51,478 by one
of $289,871 for 1935 (included under "Interest on 31% Dollar Loan" and "Redemption of Bonds (31% Dollar Loan)" on page 112
of the Estimates for 1935) together with an estimated increase
in the gross receipts of the Railway from $1,581,000 for 1934 to $1,692,900 for 1935, enables Military Contribution to be payable from net profits on the Railway ($668,377) for the first time as shown on page 112 of the Estimates for 1935. With the exemption of the service of the Railway portion of the loan (item 7) - $289,871 - from Military Contribution a net sum of
$378,506 remains taxable.
Had the Sterling Loan not been redeemed and had its
service been met from Railway earnings such an amount would not be assessable to Military Contribution, as there would have
been a deficit on the Railway of $103,793.
The War Office, however, is afraid that by the exemption
of item 7 from Military Contribution it is liable to lose
Military Contribution on the Railway deficit as calculated in paragraph 4 of the War Office letter. That is correct, pro- vided there is a deficit but the progressive increase in the gross earnings of the Railway together with the fact that it is no longer necessary to meet a service of £51,478 reduces that risk out of all comparison with the immediate increase in the amount assessable to Military Contribution as shown
in the table annexed.