NATION
FOR DIS
SCHEME
MEN
Any further communication
should be addressed to
The Secretary of the Admiralty, Bath.
"
quoting C. E. 15502/47.
on the outside of the envelope as well as in the text.
Dear Mayle,
iy
35.
L.P.-No. 8.
C. E. Branch II,
Admiralty, BATH.
16th December, 1947.
94H.K (33)
We have received information from our authorities in Hong Kong that, under the recently introduced Inland Revenue Ordinance, unestablished or temporary employees of the Admiralty will be liable, if their total emoluments come within the range of taxation, to pay income tax not only on their basic salary but also on the Colonial Allowance which we accord as an off-set to the higher cost of living at Hong Kong over that obtaining in this country.
The inclusion
of this Colonial Allowance within the orbit of taxation is justified under paragraphs 9 and 10 of the Ordinance.
2.
4
This is the first occasion on which we have been confronted with a Colonial or Dominion Government contemplating the levying of local income tax on Colonial Allowance rates accorded by the Imperial Government. As I expect you know, these Colonial Allowances are payable in all parts of the world where we have civilian employees sent out from the United Kingdom and are intended as compensation for the extra cost of living entailed by living at any particular overseas Station. Until 1943 they were subject to United Kingdom Income Tax and, accordingly, were grossed up to meet the incidence of such taxation: but as from that date they have been exempt from United Kingdom Income Tax; a certificate being sent by the Treasury to the Inland Revenue whenever any revision takes place in the Colonial Allowance rate certifying that such a revision is intended to cover the extra cost of living entailed by employment at the Station in question.
3.
N. L. Mayle, Esq., Colonial Office, Downing Street, London, S. W. 1.
The schema of Colonial Allowance rates is,
/in all...