CO885-(11-12) — Page 250

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PUBLIC

RECORD OFFICE

Reference

HmmmmMC.O.882/12

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Port Louis, amount to a total of about Rs.560,000, and I think it is more feasible to concentrate on the reduction of these contribu- tions and their eventual abolition than to attempt to enforce a new tax which will certainly not yield the amount estimated and will be inevitably abandoned as soon as conditions permit. It is not practicable both to enforce the tax and to withdraw the contributions.

9. If however the Occupiers' Tax on urban property is with- drawn, there is a good case for some increase of the House Tax on extra urban property, which would probably be counterbalanced in the urban areas by increases in rates on withdrawal or reduction of the Government subvention. The present tax is estimated to yield Rs. 400,000 though in fact it does not produce this amount owing to large arrears. The Commissioners propose the remission of the tax on houses below Rs. 1,000 in value involving a loss of Rs. 116,000. It might be fair that this loss should be made good by an increase in the higher rates.

10. The taxes proposed above would yield apart from Customs and Excise :-

Tax on loans

Tax on Government Loans and Dividends Licence duties say

House Tax say

Rs. 150,000

100,000 200,000 100,000

Rs. 550,000

The reduced figure for direct taxation proposed in paragraphs 9 and 10 of my despatch of the 4th November was Rs. 584,000 (Occupiers Tax Rs. 400,000, Licences Rs. 184,000). If the pro- gramme above can be agreed upon, I think it might be accepted as a reasonable substitute, especially as the anticipated proceeds from new Customs and Excise duties exceed the original estimates of receipts from these sources proposed by the Commissioners. It must be admitted I think, that the arguments against the Occupiers Tax would not have been pressed with such insistence locally had the tax itself not been an especially unpopular one, But whatever may be the theoretical arguments in its favour (and they are ad- mittedly not strong) the taxes on capital and licences proposed by the Unofficial Members would in fact I am convinced fall' with less inequality on persons able to pay, though it by no means follow's that they will be paid in de proportion by the richer résidents. This however was not the case with the House Tax' either 'and I am persuaded that the alternatives suggested will, at least involve less hardship.

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11. The important feature in the acceptance of these taxes however by the Council lies in the condition that they should be accompanied by a reduction in salaries by an enhanced levy of 20 per cent. which, owing to the larger increases of pay sanctioned between 1918 and 1923 in the case of the lower grades, the majority of members consider should be at a flat rate, while the members for Port Louis propose a graduated rate which would reduce the pro- ceeds of the levy by about Rs. 400,000. This would be an extremely severe measure to impose on the Civil Service and I cannot regard it as fair or reasonable. Nevertheless it will be seen from the estimates of revenue and expenditure given in my telegram No. 63* that, if there is no improvement in trade conditions, it does not appear that even with this measure a balanced budget would be achieved. As therein explained unless there is a definite improve- ment in trade conditions it seems improbable that the revenue receipts on the present basis plus the increased customs duties proposed would reach much more than Rs. 12,000,000, i.e., about. the same as in the current year. The full programme of retrench- ment proposed by the Council by way of levy on salaries and pensions amounts to Rs. 1,230,000 with reductions on other charges exclusive of the Railway of Rs. 190,000, a total of Rs. 1,420,000, leaving about Rs. 1,480,000 to be made good by taxation (apart from Customs). No allowance has been made by the Council for receipts by way of interest on mortgages on the Hurricane Loan, but if an additional Rs. 250,000 be allowed for this as suggested in my telegram, there would still remain Rs. 1,230,000 to be met by taxation. The proposals of the Council are of course quite in- adequate for this and even the full measure of direct taxation proposed by the Commissioners (again excluding customs which has been already taken into account) viz., Rs. 1,005,000 (Report page 221) would not quite suffice to meet it. Moreover it is certain that under such conditions the yield estimated from these taxes would not be realized.

12. In such circumstances, it may seem difficult to resist the con- clusion that a larger cut in salaries than that in force would be called for, but it is clear that not even the heavy reduction of 20 per cent. proposed by the Members would be sufficient to meet the case.. Nor do I think that any practicable proposals for increasing revenue could be effective during the continuance of conditions of such acute depression. Whatever proposals might be put forward on paper, I think it is certain that, under such conditions, the receipts realized would be inadequate to meet the situation. Reluctant as I am to make such a suggestion, I cannot escape the conclusion that, if present economic conditions continue without amelioration some assistance by way of a grant-in-aid would be the only practicable Even if it became necessary to have means of making ends meet.

* No. C. 84507/31 [No. 41]: not printed.

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