433
C. 92622/32 [No. 8].
DEAR CALDER,
126
No. 79.
MR. G. D. ROSEWAY (War Office)
to
MR. J. A. CALDER (COLONIAL OFFICE).
The War Office, London, S.W.1, 21st September, 1932. With reference to your official letter dated 19th August, 1932*, on the subject of the Hong Kong contribution, there would still appear to be some misunderstanding regarding the question of the treatment of profits arising on the sale of securities which is dealt with in paragraph 11.
In paragraphs 10 and 11 of our letter of the 25th April, 1932†, we agreed that any appreciation in the value of invested securities which might be included in the revenue as a result of accounting arrangements, i.e., where the Colony in fact received no cash as a result of the appreciation and any military contribution levied on the "paper appreciation would have to be paid from other revenue which had already been subject We argued, however, that in the case to military contribution, should be excluded. of the sale of securities where the Colony actually received cash we are entitled to claim military contribution in respect of any appreciation whether in sterling or dollars except where the securities sold were originally bought from funds arising from the proceeds of land sales.
It was our intention to make clear that in claiming contribution on the increase in the dollar value of sold surplus balance securities, due to depreciation in the value of the dollar, we were claiming no more than is due under paragraph 291 Colonial Regulations.
Actually, under this paragraph any profit realized from the sale of every Colonial investment should pay military contribution, but you will see from correspondence between "Vernon, Waterfield and Lyon about the end of 1929, that we were content to restrict our entitlement to the profits arising on the sale of investments purchased from the surplus balances of general revenue.
Again, as regards the last sentence of paragraph 11 of your letter our reference in sub-paragraph 2 of paragraph 11 of our letter to the amount involved being small is not to the total increase in the value of all securities due to changes in the value of the dollar but to that part of the increase which arose from the securities purchased from surplus balances. We had agreed in sub-paragraph 1 of paragraph 11 of our letter that any profits (sterling or dollar) arising on the sale of investments bought with the proceeds of land sales are exempted from assessment for military contribution, and as you stated in your official letter of 20th November, 1931, confirmed in your semi-official letter to me of the 6th February 1932§, that the whole or practically the whole of Hong Kong's invest- ments have been made from the proceeds of land sales, the amount of investments arising from surplus balances must be small and consequently I gathered that you agreed that the dollar profits arising from their sale must be very small.
Our point is that we claim military contribution on any sum included in the revenue arising from increases in value of securities which represent the investment of balances of general revenue (not land sales). The sterling part is covered by Colonial Regulations and if the dollar part is small we are prepared to waive it. Therefore, if you still stand by what you said in your letter of 6th February all that is necessary from you, to dispose of the outstanding point in connexion with the treatment of revenue arising from appre- ciation of securities, is a confirmation that any increase in the dollar value of sold investments of general balances not already covered by paragraph 291 of the Colonial Regulations can only be very small.
In the circumstances perhaps you would like to reconsider the terms of paragraph 11 of your letter. I shall be happy to talk the point over with you at any time if you think it would help to clear up the matter.
Yours, &c.,
G. D. ROSEWAY.
C. 92622/32 [No. 11].
SIR,
127
No. 80.
COLONIAL OFFICE
to
WAR OFFICE. [Answered by No. 81.]
Downing Street, 14th October, 1932. I am directed by Secretary Sir Philip Cunliffe-Lister to refer to the letter from this Department of the 19th of August* on the assessment of revenue for military contribution in Hong Kong.
2. In paragraph 11 of that letter reference is made to the question of the assessment of the profits arising from the appreciation of securities held by the Hong Kong Govern- ment. This matter has been further discussed semi-officially with representatives of the War Office. It is understood that the position of the Army Council is as follows. They do not claim military contribution on any sums transferred to revenue under Colonial Regulation 291 in respect of the appreciation of investments, representing merely book profits. On the other hand they are unable to accept the contention of the Hong Kong authorities that a distinction should be drawn between sterling appreciation and dollar appreciation; on this point Sir Philip Cunliffe-Lister is in entire agreement with the Army Council. Finally, the Army Council do not claim military contribution on profits arising from the appreciation of investments, even when realized, unless the investments in question were made out of the general revenue or surplus balances of the Colony.
3. In the result, the net claim of the Army Council is that military contribution should be levied on actually realized profits arising from the appreciation of investments made out of surplus General Revenue of the Colony, without distinction between the profits arising from sterling appreciation of the securities and profits arising from depreciation of the Hong Kong dollar. In so far, however, as the investments may be held to have been made out of the land sales revenue, which is not itself subject to military contribution, it is understood that the Army Council could not claim military contribution on the profits arising from the appreciation of such investments, in spite of their refusal to agree that the ordinary income from such investments, i.e., interest, should be exempted from As previously indicated, the total land assessment unless such interest is re-invested. sales revenue of the Colonial Govemment during the period in which the investments I am accord- have been made very considerably exceeds the amount of its investments. ingly to request you to inform the Army Council that any portion of the appreciation in investments which should be regarded as appreciation in investments made from General Revenue can in any event be only very small. Sir Philip Cunliffe-Lister will be glad to learn that, in these circumstances the Army Council are prepared to agree to the exemption from assessment to military contribution of realized profits on the appreciation of the investments of the Hong Kong Government.
4. A copy of this letter is being sent to the Treasury.
C. 92622/32 [No. 16].
No. 81.
WAR OFFICE
I-am, &c.,
H. R. COWELL.
SIR,
to
COLONIAL OFFICE.
[Answered by No. 82.]
The War Office, London, S.W.1, 25th February, 1939. With reference to your letter of the 19th August, 1932†, on the subject of claims for exemption from assessment for military contribution or other special treatment of certain items of the revenue of Hong Kong, I am commanded by the Army Council to acquaint you for the information of Secretary Sir Philip Cunliffe-Lister that they have been in communication with the Treasury on the subject.
• No. 78.
↑ No. 76,
‡ No. 79.
C. 82756/31: not printed.
* No. 78.
↑ No. 78.
PUBLIC RECORD OFFICE
Reference :-
C.O.882/11
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- | COPYRIGHT PHOTOGRAPH-NOT TO
PUBLIC RECORD OFFICE, LONDON