-
2
40
t
the Colony had continued to be liable under the 171%
arrangement.
T
3. This 20% contribution has remained unchanged in
principle ever since. The percentage is applied to the gross Colonial revenues after deducting certain specified
items such as land sales and premia on leases, Widows
and Orphans' Pensions contributions and the expenditure
of some, but not all, of the Colony's productive
undertakings. By virtue of the last deduction the Kowloon-
Canton Railway, the Government Opium Monopoly and some
other undertakings are assessed on the basis of net receipts
only but other productive undertakings, e.g., the Water-
works and the Post Office, are assessed on gross receipts.
The exact exemptions are set out in Section 2 of Ordinance
1 of 1901, the Defence Contribution Ordinance, as amended
by Ordinance 43 of 1935. Broadly, I understand that in
the case of undertakings in existence when the original
percentage was fixed the gross receipts are taken, while
in the case of undertakings established since then it has
frequently been possible for the Colonial Government to
secure the acceptance of the principle of net receipts.
4. This basis of assessment is obviously illogical
and, although it has prevailed now for a generation, has
never been free from criticism. Abortive proposals for
radical alterations were made in 1909 by Sir F. Lugard and
in 1926 by Sir C. Clementi. In the main the inconveniences
which have struck me have already been ably described by
my predecessors and I hope that the bringing of them once
more to your notice will be taken as evidence of the
continuing reality of the difficulties.
5.
The broad effect of the payment of Defence
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