415
PUBLIC RECORD OFFICE
Reference :-
TLC.O.882/11
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
90
18. Over-riding the merits of particular cases, however, is the fundamental principle that, once a class of revenue has been included in the 1895 settlement, it cannot be trans- "' to assessment on " net receipts" without a gross receipts ferred from assessment on " corresponding adjustment of the percentage. (See Haliburton Report, Section XIII, 1897, paragraph 7-9). On this principle the War Office has always taken its stand, but nevertheless with this aspect of the case the Governor does not deal. It might be held, however, that receipts from the wireless service are excused from this principle as wireless as a class of revenue did not exist in 1895.
19. Revenue claimed to be exempt from inclusion in the assessable Revenue.
(g) Municipal revenue (including waterworks
Rent of Government buildings let for profit Hospital Board revenue
Education Board revenue
1927.
$
1926. $
4,974,541.55
93,870.44
101,735.89
83,899.75
5,240,161.05 79,522.01 116,264.88 121,981.75
$5,254,047.63
$5,557,929.69
All the items going to make up these totals can be identified in the Hong Kong Blue Book except composite iterns of $56,294.92 in 1926 and $45,638.68 in 1927 included under (g) for " other miscellaneous receipts.'
In the Straits, on whose alleged practice Hong Kong's claims are modelled, the Hospital Board and Education Board count as revenue" at Hong Kong is not grouped municipalities and it is not apparent why their under (g).
"
"
20. As regards (b) of paragraph 15, much the larger number of the Hong Kong claims relate to these total exemptions; the essence of the claim is the total exemption " and municipal revenue. The distinction between from assessment of "municipal "fiscal" revenue is not one of principle but of fact and varies from State to State. Hong Kong bases its arguments not on principle but on the practice at the Straits. Hong Kong's interpretation of the Strait's practice is, however, rather wide. For instance, hawkers' licences quoted by Hong Kong as municipal on the Straits' practice, do not appear from the Straits' Blue Book to form a source of revenue at all in the Straits. On the other hand, petroleum licences claimed by Hong Kong as municipal are treated by the Straits as partly municipal and partly fiscal. But the largest single item for which exemption is claimed is rates, the amount of which in 1926 was $3,670,943.31 and in 1927 $8,720,210.87.
"
JJ
21. It is true that in the Straits Settlements these rates are municipal. But when gross revenue they did not have in the Haliburton Committee fixed percentages on their minds any definition of a " gross-revenue-in-itself" but took the gross revenue as they found it in each Colony, i.e., in the Straits exclusive, and in Hong Kong inclusive, of municipal revenue; they then fixed a percentage designed to yield much about what the Colony were paying at the time in relation to the garrison. The percentage was so
no important change in the existing revenue systems fixed on the assumption that " of the Colonies or in the method of bringing the revenue to account, which would have the effect of reducing the military contributions, will be authorized without the special concurrence of the Treasury "(i). The contrast between the treatment of "municipal revenues at Hong Kong and the Straits was pointed out by the Treasury in a letter to the Colonial Office dated 14th June, 1895, approving the proposal of the Haliburton Com- mittee for making a percentage of revenue a maximum limit of military contribution. The Haliburton Committee proposed 17 per cent for both the Straits and Hong Kong()). The Treasury proposed for the Straits a limit of 18 per cent on various grounds peculiar to the Straits, but they "further believe that it will be easier to reconcile Hong Kong to the payment of 17 per cent if a somewhat larger percentage be asked from the Straits, because in the former Colony there is no distinction, as there is in the Straits, between municipal and general revenue." The Treasury, however, did not press their contention, in deference to the strong views of the Colonial Office. Meanwhile the Governor of Hong Kong was raising the question of assessing "municipal" revenues in a despatch dated 28th August, 1895, and he proposed the exemption from assessment of a series of revenues similar to those proposed for exemption in the Colonial despatch of 1st November, 1928.
(1) Haliburton Report, Section XI, 1895, paragraph 66.
The 17 per cent was increased to 20 per cent in both cases later on in commutation of certain liabilities for lands and buildings.
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91
In a despatch dated 26th October, 1895 (No. 258) the Secretary of State for the Colonies (Mr. Joseph Chamberlain) with the concurrence of the War Office and Treasury rejected the Colony's claim. "With reference," he said, " to the inclusion in the Hong Kong revenue of certain receipts which are of a municipal character, and are not included in the general revenue of the Straits Settlements, because municipalities exist in that Colony, I have in the first place to point out to you that the municipal revenues at the Straits Settlements are only about 20 per cent of the gross revenues (general and municipal), and that for the sake of comparison between the two Colonies I could not regard as municipal "' several of the items specified in the second enclosure to your despatch under acknowledgment, which altogether amount to over 30 per cent of the revenue. Further, the cases of Hong Kong and the Straits Settlements cannot be regarded in this matter as on the same footing, since, although there are separate municipal revenues in the latter Colony, on the other hand the expenses of general administration are pro- portionately greater than in Hong Kong, partly owing to the larger area of the Colony, which is more than 50 times as large as Hong Kong, while the gross revenues (including municipal receipts) are less than three times those of Hong Kong, and partly to the distance of the several settlements from each other, requiring, in some branches of the Government Service, the maintenance of a double or triple staff of officers as compared Mr. Chamberlain again with the staff required in the compact Colony of Hong Kong. refused to accede to the Colony's requests in a despatch dated 8th June, 1896, and on 18th November, 1896, he insisted on acceptance of " 17 per cent of the gross revenue (less land sales) as at present brought to account."
"
revenue" meant 22. The comparison with the Straits is thus irrelevant because different things at Hong Kong and Straits Settlements at the time the percentage was fixed; and Hong Kong's renewed claim falls to be dealt with under the general practice in such cases that no items which were included in the assessable revenue when the percentages were fixed, should be excluded, and no claims of receipts should be withdrawn from revenue without a corresponding adjustment."'(k)
23. The principle stated in paragraph 22 and now again raised by this reserved claim, which Hong Kong suggests making, if its proposal that the assessment should be made on rateable value and not on revenue is rejected, formed the subject of lengthy discussion between the Treasury, Colonial Office, and War Office with reference to a claim by the Straits Settlements in 1909-12. The Straits' claims were:-
1J
(a) that certain revenues of the newly created Education and Hospital Boards should be deemed municipal revenue and thereby exempted from assessment;
net receipts "';
(b) that rents from Government property should be assessed on
(c) that the proceeds of the new petroleum tax should not be assessable until the
losses of the new opium policy were made good.
The Straits proceed to operate these claims, and the arrears from 1907 to 1912 amounted to £34,478. The Colonial Office in the end abandoned the claim for assessment of net receipts from buildings let for profit but they succeeded in forcing reference of the other's claims to a Committee. This (the McKinnon-Wood) Committee (1914) in their report did not deal at length with these claims; they did, however, recommend that receipts from buildings let for profit should be included in the assessable revenue. The War Office and Treasury representatives protested in a minority report against the con- cession of any of these claims. The Straits have, however, succeeded in maintaining their practice, if not their claims, as regards (a) and (b) (despite the abandonment of the latter by the Colonial Office). The war shelved the McKinnin-Wood report, and discussions since the war have taken another turn; the Straits have been paying the actual cost of the garrison, and for a time arguments about the precise composition of the Straits' gross revenue lost their importance. The Straits Settlements, however, in their annual returns of " Actual Revenue of the Colony on which the military contribu- tion is payable," do continue to make the exemptions at (a) and (b); the tax on petroleum has since been restored to the gross revenue.
24. Hong Kong might adduce the present practice of the Straits referred to in the preceding paragraph as a precedent for their present contentions in three ways:-
(a) In support of their full claim for the exemption of "municipal
revenue.
The answer to this has been given in paragraph 21. The difference between the methods of raising revenue at the Straits Settlements and at Hong Kong was known in 1895 and was taken into consideration in the Haliburton settlement and has been fully accepted by the Colonial Office.
(k) Minority report by the War Office and Treasury representatives on the McKinnon-Wood Committee, 1914.
(C38051)
H* 2