433
138
fall on Army Funds. If and when the railway is paying its way, the provision that only the net profits are taxable automatically protects the service of the loan from paying contributions, and no other protection is necessary.
6. A further point as to which the Council are not clear is the following:-From such information as is available to the Council, it appears, that the sum now allocated from the proposed new loan for the redemption of this inscribed stock does not suffice to make up the difference between the amount of that stock and the amount at which the sinking fund in connexion therewith at present stands.
7. In view of the considerations adduced above, and of the fact that the Council consider that they are at present imperfectly informed of the situation with regard to the stock which it is now proposed to redeem, they would be glad if the Governor could be asked to explain the reasons for the addition of this item to the original composition of the loan, revenue for the service of which they agreed to exempt from assessment for military contribution (War Office letter number as above of 25th February, 1933*). They would also be glad to be informed what effect the inclusion of item No. 7 will have on the military contribution. Prima facie, the exemption from assessment to contribution of revenue raised for the service of this section of the loan will reduce the total assessable revenue by at least a part of the revenue so exempted; and the reasons for exempting the inain loan for general development would clearly not apply to a loan for the replace- ment of an old issue itself liable to assessment by a new issue-which, it may be remarked, is to bear the same rate of interest as the old.
8. As regards the Bill to amend the Defence Contribution Ordinance, forwarded with your letter of 19th September, the Council note that sub-paragraph 8, of paragraph 4, of the Objects and Reasons expressly refers to the inclusion in the Hong Kong Dollar Loan Ordinance (Ordinance No. 11 of 1934) of the $3,400,000 loan for redemption of 31 per cent. Inscribed Stock regarding which the Council desire further information as set out in the preceding paragraphs, and they propose to reserve further comment on the Draft Bill pending receipt of this information.
53593/35 (No. 1].
(Confidential.)
SIR,
139
No. 94.
HONG KONG,
THE GOVERNOR
to
THE SECRETARY OF STATE.
(Received 15th April, 1935.)
Government House, 13th March, 1935. With reference to your confidential despatch of the 27th November, 1934*, trans- mitting a copy of correspondence with the War Office regarding the Hong Kong Dollar Loan Ordinance No. 11 of 1934 and the Bill to amend the Defence Contribution Ordinance 1901, I have the honour to enclose a memorandum by the Colonial Treasurer in which the effect of the redemption of the 31 per cent Sterling Loan is set out.
2. It is hoped that this explanation will meet the objections of the War Office to the inclusion of this item in the schedule to the Ordinance.
I have, &c.,
W. PEEL,
Governor, &c.
33706/34 [No. 37].
No. 93.
HONG KONG.
I am, &c.,
A. E. WIDDOWS.
Enclosure in No. 94.
MEMORANDUM.
It was decided in 1934 to take advantage of the very favourable conditions of the London market and to effect repayment of the Hong Kong 3 per cent Inscribed Stock 1918-1943 amounting to £1,485,732 16s. 5d., of which £1,143,933 1s. 4d. was raised in 1906 for the financing of the Railway.
Repayment was made from Sinking Fund 3 per cent Sterling Loan Sinking Fund Public Works Loan 1927
£1,028,845 16 11 149,905 16 7
£1,178,751 13
6
(Confidential.)
SIR,
THE SECRETARY OF STATE
to
THE GOVERNOR. [Answered by No. 94.]
Downing Street, 27th November, 1934.
I have the honour to refer to my confidential despatch of the 24th August, 1932† and to your despatch No. 364 of the 19th June‡, and to transmit to you a copy of correspondence§ with the War Office regarding the Hong Kong Dollar Ordinance No. 11 of 1934 and the Bill to amend the Defence Contribution Ordinance, 1901.
2. I shall be obliged if you will furnish me with your observations on the points raised in the letter from the War Office.
P. CUNLIFFE-LISTER.
I have, &c.,
* No. 81.
† 92622/32 [No. 6]: not printed.
33706/34 [No. 27]: not printed.
§ 99706/34 [No. 29: not printed, and No. 92.
Total
The shortage was £306,981 2s. 11d. This sum was met From sale of investments on account of surplus funds From Colony's general cash account
-£114,122 7 1
192,858 15 10
£306,981 2 11
Converted at $=1s.7¶d.
= $9,864,943,
Total
which sum was treated as an advance against fresh borrowing and is met by item 7 in the Schedule of the Hong Kong Dollar Loan Ordinance, 1934, the flotation of which was under consideration at the time. Only $3,400,000 has, however, been provided and it will be necessary to amend the Schedule under section 3 (2) of Ordinance No. 11 of 1934 and substitute the figure $3,864,943 which can be done by adjustment of items 2 and 8.
The service (interest at 3 per cent and sinking fund at 1 per cent on the Inscribed Stock Issue of 1906 (£1,143,933) amounted annually to £40,038 plus £11,440, a total of £51,478. The service for 1935 on item 7 ($3,864,943 as amended) is interest at 3 per cent –$135,273, and 1/25th of $3,864,943—$154,598, a total of $289,871, and this becomes progressively less as 1/25th of the issue is redeemed annually (section 5 (2) of Ordinance No. 11 of 1934). On the other hand the Inscribed Stock' was redeemable at the latest in 1943 while the Dollar Loan will not be wholly redeemed until 1959.
* No. 93.
(C38051)
L**
PUBLIC RECORD OFFICE
Reference :-
TELEC.O.882/11
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