CO882-(8-9) — Page 576

200

As regards the Government distillery for the production of arrack, the Army Council agree that, as in the case of railways and other productive undertakings. only the net receipts should be assessed to contribution

With regard to the Government distilleries which it is proposed to let to con- tractors, the Council are not aware to what extent the revenue received will be other than a net revenue, or what is likely to be the amount thereof

If, however, the revenue from this source should be sufficiently important to justify its being treated specially they will raise no objection. if their Lordships consider it advisable, to the application of the principle of uet receipts, to the extent that the rents receivable should be subject to a deduction in respect of (i) interest and sinking fund on the cost of erection of the building, and (ii) the cost of maintenance of the buildings. if borne by the Colonial Government

Apart from the Government distilleries, the Army Council do not see any The Colonial reason to justity the adoption of the net revenue method of assessment Office in their letter of 21st November, 1910, suggest an analogy between the pro- posals of the Ceylon Government and the recent reorganisation of the revenue system in the Straits Settlements undertaken in consequence of the Imperial Government's opium policy. but under that reorganisation the manufacture of chandu by the Straits Government has been substituted for a system under which the revenue Moreover, the results of recent departures from the gross consisted merely of rents revenue principle in the Straits Settlements are not such as to lead the Council to In their opinion it is essential to maintain favour the extension of such methods

as far as possible the basis of gross revenue, as being that deliberately selected after full consideration and as the only basis which avoids complications and disputes in ever widening degree as to what is and what is not assessable to contribution Generally speaking, the only exceptions which, in their opinion, should in future be admitted are cases of undertakings of a definitely commercial type Accordingly, the Army Council are not prepared to concur in the exclusion from assessment of the cost of collection of the new revenue in Ceylon

The Secretary,

109

The Treasury

No 209

HONG KONG.

I am, &c..

EWD WARD

THE SECRETARY OF STATE to THE GOVERNOR.

Downing Street, 10th January, 1912.

(No 9.) SIR,

I HAVE the honour to acknowledge the receipt of your despatch No. 410, of the 5th of December,* forwarding a report of the debate on The Defence Contri- bution Ordinance 1901 Amendment Ordinance, 1911."

"

2 I fear that some misapprehension may have occurred with regard to the proposed inter-departmental committee to which you referred in your speech. You had an interview with the Secretary of State. say that the delegates

and he told them he was about to appoint a Departmental Committee

I

3. I would observe that the power to appoint such a Committee does not rest with the Secretary of State, but is a matter for agreement between the three Depart- ments concerned and that the consent of the Army Council and the Lords Commis- sioners of the Treasury must be obtained before the Committee can be assembled. am at present in correspondence with the Lords Commissioners and the Council on the subject.

I have, &c.,

L. HARCOURT

1139

SIR,

No 210

HONG KONG

TREASURY to COLONIAL OFFICE.

(Received January 11, 1912.)

Treasury Chambers, 11th January, 1912 I HAVE laid before the Lords Commissioners of His Majesty's Treasury Sir Fiddes's letter of the 23rd ultimo (3×165 1911).* further respecting the assess ment to military contribution of the grants made by His Majesty's Government to Hong Kong in compensation for the loss of revenue due to the new opiumy policy

My Lords have learnt with regret that Mr. Secretary Harcourt feels unable to Invite the Hong Kong Government to pay military contribution on these grants on the ground that no mention of assessment to contribution was made at the time when the grants were fixed

In their Lordships' opinion, it was not necessary that mention should have been made, and they fail to understand why the omission, if such it can be called, should have given rise to the assumption that the grants were not assessable.

In the first place, my Lords have not been able to trace an instance in recent years in which a grant from the Imperial Exchequer has been so excluded, whereas The case of the Imperial contribution in respect of the postal agencies in Hong Kong and their Lordships' remarks in the third paragraph of the Treasury letter of 20th July, 1910, furnish clear evidence of their practice in circumstances which con cerned this same Colony,

In the present case, moreover, the grant was made in respect of loss of reventa on which military contribution had hitherto been paid, and it was, therefore, in their Lordships' opinion, the natural and reasonable inference that the grant itself should be treated in the same way. Or the position may be stated differently. The Imperial grant could be regarded as compensation for loss of either gross or net revenue. But the whole course of the correspondence preceding their Lordships final decision shows that the basis on which the amount of the grant was determined was not the net revenue but the gross; and it is, therefore, only fair to regard the grant itself as gross revenue, ¿i.e., revenue from which a deduction had to be made in respect of military contribution.

To adopt the view advocated by the Secretary of State would result in a division of the loss of revenue between the Colonial and the Imperial Exchequer in the pro- portions of 30 per cent. and 70 per cent. respectively, and my Lords cannot suppose that the Secretary of State intended that the arrangement which he recommended- whereby half the actual loss of revenue should be borne by Imperial funds-should, in point of fact, produce a result so far removed from its apparent purpose. event such an intention was never understood or shared by this Board.

In any

Finally, I am to say that the exclusion of the grant from assessment would, in their Lordships' judgment, be wholly opposed to the principle on which the Colonial contributions to military defence are based, and that, apart from the more special reasons already mentioned, they would feel obliged to object to such a policy on general grounds. In this connection I am again to invite a reference to the third paragraph of Treasury letter of 20th July, 1910.†

These considerations compel their Lordships to press for the inclusion of the grants for purposes of assessment, and they trust that upon a review of all the circumstances Mr. Harcourt will feel able to meet their Lordships' wishes in the

matter.

I am, &c.,

ROBERT CHALMERS.

• No. 207.

• No. 206.

+ 22334: not printed.

24658

PUBLIC RECORD OFFICE

Reference :-

། ། ། ། །

C.O. 882

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

9PUBLIC RECORD OFFICE, LONDON