403
PUBLIC RECORD OFFICE
Reference :--
EPERIC.O. 882/11
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
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PUBLIC RECORD OFFICE, LONDON
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districts, and it thus furnishes an index of the prosperity and expansion of the Colony. The obvious advantages of this system would be that the military contribution would increase with the prosperity of the Colony, that its amount would be known beforehand with exactness for a whole year at a time, and above all, that the present constant discussion on points of detail would be avoided. A print of the Rating Ordinance* is enclosed for convenience of reference. This proposal would of course be subject to the proviso, which at present exists, that the military contribution for any given year should not exceed the cost of the garrison for that year.
15. The question of the percentage to be taken requires some consideration. I enclose a tablet which may be of assistance in coming to a conclusion on this matter. The aim which I have set before me is to arrive at a percentage which will be fair alike to the Colony and to His Majesty's Government.
16. As is so frequently the case with statistics, the annual valuation figures require supplementary explanation. The main point to be noted is that since 1921 the valuation has been artificially depressed by the operation of the various Rents (Restriction) Ordinances, and it will at once increase when the rent restriction legislation ceases to operate. The present intention is to allow this legislation to expire on the 30th June, 1926. It is difficult to say what the increase in the annual valuation will be, but a conservative estimate would be an increase of 10 per cent. This explains the appearance of an extra set of figures for the years 1922 to 1925 in the enclosed table.
17. A further point to bear in mind is that from 1921 to 1925 the demand for houses was much in excess of the supply, and that the annual valuations for 1925-1926 and 1926-1927, though still depressed by the Rents Ordinance, indicate much more nearly the normal demand up to date.
18. Another possible source of error is the fact that the years 1923, 1924, and 1925 were abnormally high gross-receipt years, so that an average based on those years, or on a period of which those years formed a substantial part, would be a misleading average. The chief causes for the abnormally high revenue in the years in question were exceptional trade prosperity, a land boom, and high yield of estate duties and opium revenue. Opium revenue is now rapidly decreasing and may ultimately disappear altogether.
19. It may seem strange that the military contribution figures for 1925 and 1926 are so high in view of the fact that 1925 included six months of boycott and that there have already been five months of boycott in 1926. The explanation is simple. Apart from adjust- ments in respect of the previous year, the military contribution shown in the enclosed table for any given year represents the contribution for that year as calculated on the estimated revenue. An addition or deduction is made in each year according as the actual revenue for the previous year was more or less than the estimated revenue for that year. This explains why the figure for 1925 is high in spite of the fall in revenue during the latter half of that year. This fall in revenue during the latter half of 1925 might have been expected to show itself in the 1926 figures by reason of the deduction made on account of the revenue for 1925 having fallen below the estimate. As it happened, the fall in other heads of revenue was nearly balanced by a very exceptional yield in death duties, a purely fortuitous cause. The figures for 1926 are, as explained above, based on the estimated revenue for that year, and in framing the estimate of revenue for 1926 Sir Edward Stubbs assumed, as stated in his budget speech, that during at least the greater part of the year conditions would be normal (1925 Hansard, page 72). This expectation has not been fulfilled. It has been estimated that the military contribution for the year 1927, if calculated on the present basis, and allowing for an adjustment in respect of the year 1926, would only be about $3,600,000.
20. The average of the military contribution, as shown in the enclosed table, for the eight years since the Armistice is $3,566,796. If, as is estimated, the annual valuation goes up 10 per cent. next year, 12 per cent. on that annual valuation would amount to $3,695,767. I have, therefore, come to the conclusion that 12 per cent, would be a fair percentage to take. It would not be ungenerous to His Majesty's Government, as it would probably produce an amount greater than the average of the military contribution for the last eight years, a period which includes three years of unusually high gross receipts. Indeed, it is only on account of my anxiety to get rid of the friction which the present system has always developed that I propose so high a percentage.
21. It will always be in the mutual interest both of the Colony and of His Majesty's Government that the annual valuation should be as high as possible. It is true that, speaking generally, the rates are at present only 13 per cent., so that if my proposal be dopted the Colonial Government will be financially interested in only 1 per cent. of the
↑ Not printed.
* Not reprinted.
73
revenue from rates, but it is probable that the rate will have to be increased before very long. In any case, the Assessor is bound by law to assess in a particular way and he has in fact little discretion in the matter. I mention these points in order to meet possible criticism that the Colonial Government might, through inadvertence, fail to keep the annual valuation up to its proper amount. It will be seen that there is in fact no ground
for such a criticism.
22. In conclusion I wish to emphasize again that my object is not to reduce the amount of military contribution, but to eliminate constant discussion and friction, and, incidentally, to get rid of some anomalies of the present system, and to reach a position in which this Government will be better able throughout the year to 'estimate its exact financial position as regards its liability for military contribution.
23. This despatch has been considered in draft by the Executive Council and has been approved by all members.
C. 22459 26.
(No. 421.) SIR,
No. 55.
HONG KONG.
I have, &c.,
C. CLEMENTI,
Governor, &c.
THE SECRETARY OF STATE
to
THE GOVERNOR. [Answered by No. 56.]
Downing Street, 15th December, 1926.
I have the honour to acknowledge the receipt of your despatch No. 298 of the 24th June, 1926*, in which you submit a proposal that in future the military contribution for the whole of any given year should be a certain percentage of the annual valuation made during the previous year under the Rating Ordinance, No. 6 of 1901.
2. While I agree that the rating valuation affords a more satisfactory basis for assessment, it would be idle, to approach the Treasury with a proposal for the adoption of the system unless the contribution calculated on this basis could be shown to be not less than the average contribution on the old basis for the last three years. Any repre- sentations to the Treasury would also be more likely to have weight if they were brought up in connexion with a request for relief under the present system of assessment such as is foreshadowed in paragraph 6 and 7 of your despatch.
C. 52802/28 [No. 9].
No. 56.
HONG KONG.
I have, &c.,
L. S. AMERY.
THE OFFICER ADMINISTERING THE GOVERNMENT
(Confidential (1).)
to
THE SECRETARY OF STATE. (Received 30th August, 1928.)
[Answered by No. 58.]
Government House, Hong Kong, 28th July, 1928.
SIR,
With reference to your despatch No. 421 of 15th December, 1926†, and my telegram of 24th July, 1928, regarding the military contribution payable by this Colony, I have the honour to submit for your information the following figures in support of the proposal that in future the contribution in respect of any year should be a certain percentage of the annual valuation made during the previous year.
* No. 54.
† No. 55.
C. 52802/28 [No. 7]: not printed.
(C38051)