07
5
(A) Defence expenditure to constitute a separate Defence Budget. Revenue to be credited to this Budget would consist of the proceeds of income tax which would be introduced immediately without waiting for preliminary enquiry scggcuted by the Taxation Committee Report of April 1939. The standard rate suggested in the first place is 10% with surcharge of 54 on excess of income above about £1,000 and 10% above about £2,000. To become effective from the 1st April 1940 which is the earliest date considered to be adminstratively practicable.
Fo..lowing expenses would be met from income tax prooeeda;-(a) administrative costs of Income Tax Department (b) existing Defence Services excluding defence contribution 1.e. Volunteer Forces and Air Raid Precautions estimate for which in 1940/41 to tels,1,500,000 for 15 months (o) special war expenditure e.g. cost of German Internees, Censorship, Department of Information (d) acquisition or construction in Hong Kong of small vessels or aircraft or both for the defence of the Colony provided Naval or Air Force Authorities consider such expenditure useful (e) balance to be voted as a free gift to is Majesty's Government additional to fixed Defence contribution in aid of general war expenditure.
Yield of income tax at 10% was very approximately estimated by the Taxation Committee at $ 10,000,000 per annum. Part of this would be offset by loss to the United Kingdom exchequer
owing to Dominion income tax relief. Total available for purposes af (a) and (e) combined should be of the order of 7,500,000 per annum unless expenses under (a) are unexpectedly heavy owing to e.g. to full mobilization of volunteers.
A