2
The Secretary of State has recorded a
You note on the attached copy of a Hong Kong
telegram in which the Governor sets out as a matter
of urgency his proposals for the war time budget of
the Colony.
Apart from increased taxation to supply
the necessary provision to meet the ordinary
expenditure including certain special expenditure for
the extension of "Social Services", the Governor
intends to institute a separate defence budget against
which will be charged all the various forms of
defence expenditure of the Hong Kong Government (but
excluding the normal statutory Defence Contribution)
and which will be financed by the special imposition
of a tax on incomes on a sufficient scale to show a
substantial surplus (estimated to be about £468,000
per annum) which will be devoted to
موی
(a) the acquisition construction in Hong Kong
of such small war vessels or aircraft for the defence
of the Colony as the Naval and Air Force authorities
may consider useful,
(b) the balance to be voted as a free gift
to H.M.G., additional to the statutory Defence
Contribution, in aid of the general war expenditure.
On this part of the proposals the Secretary of State
has written a note as follows:
"As regards point at A I am inclined to discourage these gifts. They don't really help us much; the money could be well spent in the Colonies concerned, and if one Colony starts others will feel that they have got to follow suit. The thought is very kind and I appreciate the patriotism of the Colonial peoples who suggest these gifts, and the psychological value of accepting them. But what weighs with me is that the money really can be well spent in the Colonies.
? Discuss. M.M."
For
Page
Page
9
For many years past H.M.G. have accepted
from the Straits Settlements and the Malay States
successive gifts of money towards the rising costs
of general Empire Defence and these were special
votes from surplus balances without in any way
The
Α
interfering with increasing expenditure in Malaya
on what may be termed Social Services.
It must be
expected that in the present war, as in 1914-18,
the Malay Rulers (like the Indian Princes) will set
an example of making special contributions in cash
and in kind to H.M.G. for the prosecution of the
war and this will be accompanied as in 1914-18 by
similar gifts from the Straits Settlements (where
in 1916 a special war tax on incomes was instituted
for the express purpose of presenting the whole
yield to H.M.G. for war expenditure).
The
In Hong Kong a full appreciation of war
conditions has become endemic with their local
experiences in the last two and a half years. For
a time the Colony prospered economically with the
eclipse of Shanghai, and still the revenue receipts
this year have so far exceeded those of last.
Colonial Government has paid constant attention to
its Social Services, difficult as they are in the
conditions of a swarming Chinese population in one
of the great seaports of the world - a population
which has been doubled by Chinese rich and poor taking
refuge in the Colony. The main normal source of the
Colony's revenue is derived from rates on property
and in the last war a special increase of 7 per cent.
was imposed for the purpose of handing over to H.M.G.
the resulting yield. The imposition of an income
tax
age 9
age 9
10
tax in the circumstances of Hong Kong has from time
to time in past years been considered but the
practical difficulties of operating such a tax
effectively and fairly have always been considered
insuperable until it was re-examined by a local
Committee last winter, as a result of whose report
the Governor had in the summer asked for an expert
from home to go out to conduct an investigation.
The difficulties of such a tax will, of course, remain
but no opposition need be anticipated to an immediate imposition of it as a war tax for the purpose now
contemplated.
It is more than questionable whether the money could even be obtained for merely local
expenditure; if an income tax were imposed in the
face of local opposition the opportunities for
evasion in the circumstances of Hong Kong are almost
limitless.
The important thing seems to be that the
proposed special contribution from Hong Kong to
H.M.G. will not in any sense mean the deterioration
of local provision for social or other necessary
services in the Colony. In territories like
Hong Kong and Malaya where the latent resources
are very considerable any discouragement of patriotic feeling expressing itself in the way proposed would, I feel sure, not be understood and would probably be ineffective for the purpose which the Secretary
of State has in mind. Apart from the gifts of Indian Princes I see that a gift from the Sheik of Bahrein of £30,000 has already been accepted. Even from such a relatively poor territory as Mukalla in the Aden Protectorate H.M.G. has accepted a gift of
aPage 11