CO885-(11-12) — Page 37

C. 10740/26 [No. 4].

253

703

No. 219.

STRAITS SETTLEMENTS.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 6th September, 1926.).

(Confidential.)

SIR,

Government House, Singapore, 13th August, 1926. I HAVE the honour to refer to your Confidential despatch of the 20th January, 1926,* on the subject of the constitution of the Opium Revenue Reserve Fund.

2. I have delayed my reply to your despatch as I wished to see how unofficial opposition to the policy of the Reserve Fund would develop, and whether the Military contribution would be brought into the discussion.

3. It will be within your recollection that the question of the Military contribu- tion has been taken up by the Association of British Malaya in the memorandum transmitted to me with your despatch No. 184 of the 14th April, 1926.†

I do not here propose to comment upon this memorandum further than to say that I do not agree with the statement in paragraph 4: "Thus the Colony in effect will be paying part of its 20 per cent. Military contribution twice over.

It is only the interest accruing from time to time that might be liable for contribution, and this is an item that has not previously appeared in the Colony's accounts.

4. The argument for the exemption of the revenue credited to the Opium Revenue Reserve Fund from assessment for the Military contribution may be briefly stated thus: The contribution to the Opium Revenue Reserve Fund is not normal expenditure. To meet this abnormal expenditure additional taxation must be imposed r existing taxation must be retained at a level higher than would otherwise be neces- sary. In either case there is abnormal revenue to meet the abnormal expenditure.

Taxation to provide for the contribution to the Opium Revenue Reserve Fund is solely for the benefit of future taxpayers and is comparable with taxation to provide interest and sinking fund charges on a loan for permanent public works. In the one case future taxpayers are presented with an asset in the form of a valuable public work in the other with an asset in the form of a revenue-producing fund.

In the correspondence accompanying the Earl of Elgin's Confidential despatch of 2nd March, 1906, it was agreed by the Lords Commissioners of the Treasury and by the Army Council that the proceeds of taxation to provide for the interest and sinking fund charges on a loan to defray the cost of public works should be excluded from the revenue of the Colony for the purpose of the calculation of the Military contribution. On similar grounds the proceeds of taxation providing for the contribution to the Opium Revenue Reserve Fund should be accorded the same treatment..

5. In conclusion I wish to invite your attention to the following extract from the speech of my predecessor Sir John Anderson in the Legislative Council on the 6th July, 1906:-

"I may say that, when I had this matter under my consideration, I thought, what I am sure everybody in Singapore will also think, that it was very hard that when we were undertaking these very large improvements, which would not directly, nor within a very long period, add directly to our revenue, although they are really necessary to our interests as a great commercial entrepôt, and that when we should have raised extra taxation, one-fifth of that extra taxation should be diverted to the Imperial Exchequer. I made representations to the Government at home, and they have agreed that the proceeds of all extra taxation levied under this law, in so far as they are required for the service of the loan, that is to say, in so far as they are required for the payment of interest and sinking fund, are not to be liable for assessment to the Military contribution."

I am advised that the acceptance of my proposals will do much to mitigate the present unofficial opposition to the policy of the Opium Revenue Reserve Fund.

I have, &c.,

H. MARRIOTT,

Governor's Deputy.

No. 220.

FEDERATED MALAY STATES.

THE HIGH COMMISSIONER to THE SECRETARY OF STATE. (Received 4th October, 1926.)

(No. 498.)

SIR,

Government House, Kuala Lumpur, 6th September, 1926. I HAVE the honour to refer to paragraph 6 of my despatch No. 166 dated the 25th March, 1926,* in which I promised to address you further on the subject of the investments and the balances of this year's contribution to the Opium Revenue Replacement Reserve Fund.

2. The contribution entered in this year's Estimates is $2,100,000, being 15 per centum of the estimated receipts from sales of chandu (opium revenue), and the Crown Agents were instructed by you to invest half this sum on the 1st of May on behalf of the Reserve Fund.

3. I suggest that the Crown Agents be instructed to invest on the 1st of October a further sum of $525,000 in respect of the third quarter of the year by transferring investments from surplus funds to the Opium Revenue Replacement Reserve Fund. The balance of the contribution will be invested when the actual receipts from the sales of chandu are known.

4. I propose in future, if you have no objection, to instruct the Crown Agents direct from the Federal Secretariat with regard to these investments. I have, &c.,

C. 10740/26 [No. 5].

H

No. 221.

L. N. GUILLEMARD.

COLONIAL OFFICE to CROWN AGENTS FOR THE COLONIES.

Downing Street, 2nd November, 1926.

GENTLEMEN,

WITH reference to the letter from this Department of the 29th of April,† I am directed by Mr. Secretary Amery to transmit to you the accompanying copy of a further despatch from the High Commissioner for the Malay States in regard to the Opium Revenue Replacement Reserve Fund, and to request you to proceed as indicated in paragraph 3 of this despatch.

The High Commissioner is being informed that Mr. Amery sees no objection to instructions in regard to these investments being sent to you direct by the Federated Malay States Government. You should, however, report to this Department the action which you may take from time to time in accordance with instructions so received.

C. 10740/26 [No. 10].

(Confidential.)

No. 222.

I am, &c.,

COLONIAL OFFICE to WAR OFFICE.

G. GRINDLE.

SIR,

Downing Street, 9th November, 1926. I AM directed by Mr. Secretary Amery to request you to inform the Army Council that the Government of the Straits Settlements recently constituted a fund bearing the name of the Opium Revenue Replacement Fund. The circumstances in which the Fund came into being are outlined in the accompanying memorandum. The Governor has represented that in any year in which a contribution of a percentage of the total revenue of the Colony is paid into the Fund a corresponding reduction should be made in the revenue assessable to Military contribution under Ordinance No. 64 (Defence Contribution).

53916/25: not printed.

† C. 6922/26: not printed.

7284/06: not printed.

* No. 217.

+ No. 218.

‡ No. 220.

PUBLIC RECORD OFFICE

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