423
PUBLIC RECORD OFFICE
Reference :-
C.O.882/11
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO
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1 per cent for sinking fund (paragraph 5 of Colonial Office letter of 21st March, 1904, to the War Office). At the time it was stated that loans could not be raised at less than 3 per cent. When the system was introduced, the deductions were not made retrospective in respect of past expenditure, but were allowed to be continued for 50 years in respect of such expenditure. The concession does not apply if the capital expenditure met from revenue is not permanently borne by revenue, i.e., if a loan is subsequently floated to repay to revenue any sums temporarily utilized from revenue (Treasury letter No. 15603/12 to Colonial Office of 12th August, 1912 (Mauritius)).
"
It should also be noted that it has been pointed out definitely in connexion with loans for special services (Treasury letter No. 7673/08 of 8th August, 1908, to the Colonial revenue raised Office (Straits Settlements)) that it cannot be admitted that in all cases for the purpose of paying interest on loans for certain purposes would be exempt from assessment to military contribution," and as regards capital expenditure met from revenue (War Office letter of 18th July, 1908, to Treasury (Hong Kong))" the Army Council are not prepared to admit as a general principle that the appropriation of revenue to capital expenditure should entitle a Colony to the exclusion of such revenue in calculating military contribution."
revenue.'
case has
6. Class II. Exclusion completely of certain items not regarded as No general principle has governed the decisions in this class. Each been examined on its merits. It may, however, be said that in certain cases reimburse- ments received by a Colony for activities outside its normal functions have been approved for exclusion, e.g., repayments of loans raised to relieve distress, or to enable colonists to purchase mechanical transport. Again, where the expenses of a special service have exceeded the derived revenue, exemption has been given (Hong Kong, receipts of Weihaiwei Post Office, with the condition that the net receipts basis should be adopted if the revenue at any time exceeded the expenditure).
On the other hand, items which might strictly be regarded as not "revenue " have not been exempted, when application has been made, because they were included in the gross revenue in 1895, e.g., Local Revenue, District collections (not municipal) made in the Straits Settlements for roads, land drainage, &c., which must be expanded by the Government in full in the localities where raised, refused 1907.
The revenue derived from Christmas Island and Labuan, which came under the Government of the Straits Settlements after 1895 and have no garrison, was exempted from the contribution while the expenditure on them exceeded the revenue. With the growth of revenue from these sources, the items are now treated on the basis of net receipts.
7. Class III. Special exemptions.-Revenue from taxation of a purely temporary character definitely earmarked for a particular service has been exempted in certain cases. Where a special tax has been levied for purposes of harbour improvements on the adjacent property owners who will benefit, the proceeds were exempted (Straits Settlements.) The exclusion from assessment of revenue specially raised in Mauritius to enable anti-malarial measures to be undertaken was agreed to in principle.
- II. The Claims now made by the Government of Hong Kong for Modification of
Assessable Revenue.
Note.-The effect on the appropriations-in-aid to Army Funds of the suggested modi- fication has been measured in sterling, taking the dollar as equal is., the approximate rate now current.
8. In Colonial Office letter of 27th February, 1931, the Colonial office put forward a claim from the Governor of Hong Kong for certain items of the revenue of the Colony of Hong Kong to be exempted from assessment for military contribution. It was stated in October, 1928 (Colonial Office letter of 12th October, 1928), that such a claim would be made in the event of our not agreeing to the Colony's proposal to alter the method of assessment from percentage of revenue to percentage of rateable valuation. The Colony's proposal was refused and a despatch (Colonial Office to the Governor of 26th July, 1930), to the Governor in July 1930, was agreed with the Treasury and the Colonial Office which, while notifying the refusal of the proposal to alter the basis of assessment, indicated that consideration was being given to the question as to whether any modifications in the existing system were desirable and possible in order to bring it up to date. The Colony were asked to submit details of the concessions they thought were equitable, but were also informed that the general principles governing any deduction from gross revenue laid down by the Haliburton Committee would have to be borne in mind. In particular, the Colony were reminded that the exemption from assessment for contribution of any items of revenue which were taken into account in reaching the present basis of the contribution,
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i.e., 20 per cent of the assessable revenue, would pro tanto disturb the proportion between means and contribution (established by the Haliburton Committee)... it would accordingly be necessary to restore the proportion by a corresponding increase in the percentage.
The items originally suggested by the Governor of Hong Kong as proper for modifi- cation before the percentage of revenue was applied for calculation of the contribution are given in the enclosures to the Colonial Office letter of 12th October, 1928, as follows:--
(a) Wireless Telegraphy;
(b) Waterworks;
(c) Aerodrome;
(d) Harbour Dredging;
(e) Post Office; (f) Ferries;
To be treated on the basis of net receipts.
(g) Operations properly chargeable to municipal rates to be excluded. In addition, the Colony suggested that the interest on capital expenditure defrayed from revenue in undertakings treated on the net receipts basis should be increased from 4 per cent. to 6 per cent. Attention was also drawn to the question whether military contribution should be raised on the appreciation of securities when sold. On this last item a further separate letter was forwarded by the Colonial Office in February, 1930 (Colonial Office letter of 19th February, 1930).
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9. Particulars of the items now put forward by the Colony for modification were enclosed with Colonial Office letter of 27th February, 1931; they are:-
A. Wireless Telegraphy.
(1) 4 per cent rebate on capital expenditure to be allowed. (2) Assessment of net instead of gross receipts. (3) Increase of rebate under (1) from 4 to 6 per cent.
B. Charges for the use of Government motor vans.
gross receipts.
Assessment of net instead of
C. Contribution from Chinese Government for maintenance of Gap Rock Lighthouse.
Total exemption.
D. Contribution for anti-piracy escorts. Exemption of actual disbursements.
E. House Service Account. Exemption of all but net receipts from the installation
of water in private houses.
F. Overpayment in previous years.
G. Waterworks undertakings built out of revenue.
expenditure met from revenue.
Rebate 4 per cent on capital
In their despatch of July, 1930, inviting these claims, the Colonial Office drew particular attention to the principles underlying agreement to modifications of revenue to be assessd and presumably it may be taken that the items referred to in paragraph 8 and not referred to in the latest despatch are withdrawn either because they cannot be modified without an alteration of the percentage basis of the contribution (Post Office, Municipal revenue, etc.) or because there is no revenue yet (Aerodrome, Ferries).
The War Office provisional remarks on the items mentioned in paragraph 8 (based on the information then available) are contained in the enclosure to War Office letter of 25th April, 1929, to the Treasury. They have been embodied, so far as they are appro- priate in the light of the more detailed information now available, in the detailed remarks below.
10. A. Wireless Telegraphy.—(1) From 1915 to 1929 some $464,000 has been spent by the Colony on capital outlay on wireless telegraphy out of revenue and further expendi- ture of about $59,000 was anticipated in 1930. The Colony claim that the usual rebate of 4 per cent on this capital expenditure should be allowed for 50 years (see paragraph 5 above). This claim is necessarily linked up with A (2) below, as we have never admitted any such rebate except in connexion with the concession which is permitted in certain cases whereby only the net receipts and not the gross receipts of productive undertakings are assessed for contribution purposes (see paragraph 4 above). The precedents are the same as those for A (2) below, and the financial effect is considered there.
11. A (2). Up to the present the gross receipts from wireless telegraphy have been included in assessable revenue. The Colony claim that the expenses (personal emolu- ments, stores, rent of offices, interest on capital expenditure, etc.) should be deducted before assessment to contribution is made.
(C38051)
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