Appendix A.
FINANCIAL REPORT FOR THE YEAR 1938.
I. REVENUE AND EXPENDITURE,
The outstanding feature of the financial results of 1938 has been the large increase in both revenue and expenditure. The estimates provided for a deficit of $3,124,629, revenue being put at $30,254,920 and expenditure at $33,379,549. Actual revenue exceeded the estimate by $6,480,935 and actual expenditure, including certain special non-recurrent items, exceeded the estimate by $3,796,349 leaving a net deficit of $440,043. The surplus of assets on 31st December, 1938, was $13,562,235 which may be compared with a figure of approximately $9,000,000 which was contemplated as probable after allowing for anticipated deficits in 1937 and 1938 at the time when the 1938 estimates were originally prepared.
2. No new or increased taxes were imposed during the year and the increase in both revenue and expenditure was almost wholly due to the special conditions arising out of the Sino-Japanese hostilities. The special activity in trade, due to the diversion of a much increased proportion of China's trade to ports trading through Hong Kong, which commenced towards the end of 1937 continued during the greater part of 1938, that is, until the Japanese invasion of South China, and the increase of the Colony's population owing to the influx of refugees continued with some fluctuations throughout the year. The Japanese occupation of Canton in October caused some slackening of trade activity, but increased the stream of refugees and up to the end of 1938 no decline in revenue receipts was perceptible.
3. Most of the principal sources of revenue, of which details are given in the Accountant-General's report annexed, show substantial increases. The number of vacant tenements fell to practically nil and receipts from rates were correspondingly higher than in 1937. Liquor and tobacco duties show very large increases and many other items, such as entertainment and betting tax and royalties payable by transport companies, which are affected by the magnitude of the population rose correspondingly. Receipts from land sales rose with the demand for new building and reached the highest level since 1932.
4. The situation in China and its repercussions on the Colony, particularly the incursion of increasing numbers of destitute or semi-destitute refugees, caused also considerable increases of expenditure, details of which are given in the Accountant-General's report. In all, supplementary votes for a total of $5,430,507 were approved by the Legislative Council and the Secretary of State. The following analysis of these shows the main categories of this supplementary expenditure.
(1) Accounting adjustments, not involving the authorization of new expenditure $1,376,083
(2) Revotes of provision in previous estimates 188,228
(3) Excesses on approved votes due to increased prices of supplies or services 374,614
(4) Excesses on provision for pensions and passages of Government servants 439,184
(5) Post Office—increases due to introduction of air mail, changes in transit charges, etc. 275,600
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