140
As stated in paragraphs 4 and 5 of the War Office letter*, only the net profits of the Railway are assessable to Military Contribution and this automatically protects the service of the loan from paying contribution provided the Railway is paying its way. The replace- ment of a loan service of £51,478 by one of $289,871 for 1935 (including under "' Interest on 3 per cent Dollar Loan" and "Redemption of Bonds (3 per cent Dollar Loan)'' on page 112 of the Estimates for 1935) together with an estimated increase in the gross receipts of the Railway from $1,581,000 for 1934 to $1,692,900 for 1935, enables Military Contribution to be payable from net profits on the Railway ($668,377) for the first time as shown on page 112 of the Estimates for 1935. With the exemption of the service of the Railway portion of the loan (item 7)-$289,871-from Military Contribution a net sum of $378,506 remains taxable.
Had the Sterling Loan no been redeemed and had its service been met from Railway earnings such an amount woul I not be assessable to Military Contribution, as there would have been a deficit on the Rai.way of $103,793.
The War Office, however, is afraid that by the exemption of item 7 from Military Contribution it is liable to lose Military Contribution on the Railway deficit as calculated in paragraph 4 of the War Office letter*. That is correct, provided there is a deficit but the progressive increase in the gross earnings of the Railway together with the fact that it is no longer necessary to meet a service of £51,478 reduces that risk out of all comparison with the immediate increase in the amount assessable to Military Contribution as shown in the table annexed.
Kowloon-Canton Railway (1935 Estimates).
141
No. 95.
53593/35 [No. 2].
COLONIAL OFFICE
to
SIR,
WAR OFFICE. [Answered by No. 96.]
Downing Street, 10th May, 1935.
I am directed by Secretary Sir Philip Cunliffe-Lister to refer to your letter of the 25th of October, 1934* regarding the Hong Kong Dollar Loan Ordinance No. 11 of 1934 and the Bill to amend the Defence Contribution Ordinance 1901, and to transmit to you, to be laid before the Army Council, the accompanying copy of a despatch† from the Governor of Hong Kong enclosing a memorandum by the Colonial Treasurer explaining the effect of the redemption of the 34 per cent Sterling Loan.
I am, &c.,
53593/35 [No. 9].
No. 96.
WAR OFFICE
to
H. R. COWELL.
440
COLONIAL OFFICE.
War Office, S.W.1, 6th September, 1935.
I am commanded by the Army Council to refer to your letter of 10th May‡ for- warding a copy of a despatch† from the Governor of Hong Kong regarding the effect on the military contribution paid by the Colony of the inclusion in the new 3 per cent Dollar Loan of an item for the redemption of the existing 3 per cent Sterling Inscribed Stock of the Colony.
I am to say that the Council have given careful consideration to the explanations furnished in the memorandum by the Colonial Treasurer, and they note the view therein advanced that the amount of the military contribution is not likely to be adversely affected over the period of years, taken as a whole, of the currency of the new 3 per cent Dollar Loan. In the circumstances they will not in this case press further their objection to the substitution of a loan which is exempt from military contribution for one which is not. I am accordingly to inform you that they have no further observation to make on the Hong Kong Dollar Loan Ordinance, No. 11 of 1934, forwarded with your letter of 13th September§ last, or on the Bill to amend the Defence Contribution Ordinance enclosed with your letter of the 19th|| idem.
Gross Receipts
Less Working Expenses
$1,692,900 1,024,523
SIR,
Net Profits
$668,377
Proportion (on $3,864,943) of Interest on 3 per cent
Dollar Loan
Redemption of Bonds (31 per cent Dollar Loan)
$135,273 154,598
Total
Railway earnings assessable...
$289,871
$378,506
Old system of calculation.
Gross Receipts
$1,692,900
444
Less Working Expenses
$1,024,523
Interest at 3 per cent on Inscribed Stock
Issue of 1906
£40,038
Sinking Fund at 1 per cent on Inscribed Stock
Issue of 1906
£11,440
£51,478
£51,478 @1s. 4d.
772,170
Deficit
$1,796,693
$103,793
• No. 92.
53538/35 [No. 11].
No. 97.
I am, &c.,
H. J. CREEDY.
HONG KONG.
THE SECRETARY OF STATE
to
THE OFFICER ADMINISTERING THE GOVERNMENT
(Sent 4 p.m., 9th September, 1935.)
TELEGRAM.
No. 146. Confidential. My telegram No. 114 of 28th November, 1934¶, I approve introduction into Legislative Council of Bill enclosed in your despatch of 19th July, 1935, confidential (2)**.
* No. 92.
† No. 94.
‡ No. 95. ¶ 33706/34 [No. 38]: not printed.
§ 33706/34 [No. 29]: not printed.
** No. 90.
No. 91.
(C 38051)
L 2
PUBLIC RECORD OFFICE
Reference :---
C.O.882/11
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
PUBLIC RECORD OFFICE, LONDON