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PUBLIC RECORD OFFICE

Reference :-

PIC.O. 882/11

PUBLIC RECORD OFFICE, LONDON

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

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future years an appendix be added to the Estimates setting out under different heads the estimated normal annual expenditure for the year.

20. It has been the practice in the past to meet the cost of large permanent works from the revenue of the current year. The Colony has, apparently, now reached a stage at which it is impossible to continue this policy if the Colony is to develop as rapidly as is desirable. The cost of public works of this kind should now, in our opinjon, be met either from savings or by means of loans. When the liquid surplus of $22 million referred to in paragraph 16 is exhausted, further funds should be made available by the flotation of a loan by the Colony for the purpose of making liquid the sums now locked up in loans to the Harbour Boards and the States of Kelantan and Trengganu. The annual charges of interest and sinking fund contribution on the loan would be payable by the Colony's debtors, and, before the loan is floated, it will be necessary that the Colony should be satisfied that such payments will be duly made. [Paragraph 20, sentences 1-3. I am not in favour of contracting loans to cover expenditure on large works. I consider that the interests of the Colony would be served best by continuing the practice of meeting such expenditure from revenue supplemented by any surplus funds (past savings) which may exist. In my opinion the limitation of expenditure to the amount of revenue, with the maintenance of a small surplus to cover the inequalities of contiguous years forms a good check on excessive expenditure. Signed J. BAGNALL.]

21. We think it desirable to refer to another point in connexion with public works expenditure. At present, when a boom is in progress, Government, relying entirely on revenue, has money and undertakes large works, just when every one else is also carying out large works and when consequently there is the greatest demand for labour and material. When the slump sets in, Government revenue falls and expendit ture is curtailed just at the time when labour is plentiful and material cheap. We hold the opinion that Government public works of a permanent nature should be carried on as far as possible at times when the commercial community is suffering from a slump. Wages are then low and costs are cheaper. The use of surplus labour at such a time would prevent to some extent the exodus which takes place to countries of origin and by equalizing the demand for labour we should have a population less liable to fluctuation in numbers with resultant benefit to the Colony.

22. We do not consider that further taxation is at present necessary, but in compliance with our terms of reference, we have considered what new sources of revenue are available and what forms additional taxation can take, if further taxation should in the future become necessary.

23. We deal first with two possible sources of revenue and then with new forms of taxation.

24. Currency Guarantee Fund.-Section 16 (3) of the Currency Ordinance pre- scribes the conditions under which payments can be made from the Currency Guarantee Fund to the general revenue of the Colony. Hitherto the only payment which has been made is one of $20 million in 1925.

We make the following general observations on the question of such payments :— (1) Large accumulations of the surplus funds of the Currency Commissioners should not

be allowed to occur in the future.

(2) It would appear that considerable sums of money can safely be taken from time to time from the Currency Guarantee Fund and passed into the general revenue of the Colony.

(3) The Treasurer suggests that it would be safe to reckon on a revenue of sums equivalent to over $4 million and possibly to $5 million per annum from this

source.

(4) Action should be taken under Section 16 (3) as often as safe finance will warrant. 25. Conversion of Crown Leases.-The Commissioner of Lands has furnished us with a statement showing the area in the town of Singapore of unconverted 99-year leases which will expire during the next 24 years. The total of such area is 3 million square feet. The Commissioner of Lands considers that the present average value is at least $3 per square foot, so that the total revenue in premia during the above period should amount to over $11 million. The Commissioner of Lands estimates the corresponding increase of rent at the end of 24 years at about $72,000.

The existing practice for the conversion of leases is laid down by Gazette Notifi- cation 226 of 28th February, 1908. Conditions have changed to a large extent since 1908 and we think the whole question of conversion of leases might now be recon- sidered.

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26. The general principles on which taxation in the Colony should, in our opinion, be based are as follows:-

(1) The freedom of the ports of the Colony is the acid test by which any proposal for

taxation should be first considered.

(2) Changes in taxes should be made at infrequent intervals as a steady tax is far

less harmful than one which is subject to frequent alteration.

(3) The cost of collection and the opportunity for evasion must be relatively small. We have endeavoured to apply these principles in making our recommendations.

27. Betting Tax.-Large sums of money change hands on the totalisator and by means of sweepstakes and loteries in the Colony. Betting at race meetings can be classified as a luxury.

tions.

We are in favour of a tax of 5 per cent. on all sums staked on the totalisator and one of 10 per cent. on all sweepstakes and lotteries promoted by clubs and associa- A higher rate is suggested in the case of sweepstakes and lotteries because in this form of gambling the winners of stakes or prizes are determined by pure chance. 28. Entertainment Tax.-We consider that a reasonable tax on entertainments could be collected without difficulty and might yield an appreciable increase of revenue without being unduly burdensome,

29. Increased duties on Liquors and Tobacco. These are luxuries and can, in our opinion, stand additional taxation when such increases become necessary.

30. Stamp Duties. We are not in favour of any increase of stamp duties until the necessity arises for additional taxation.

The items under which increases should then first be considered are Death Duties, Conveyance Duties, Promissory Notes, Transfers of Shares, and Share Contract Notes. The first two of these might yield a considerable increase of revenue.

Death duties on very large estates might be increased. The duties on such estates are at present higher than those in force in Hong Kong but lower than those in force in Ceylon.

Conveyance duty is only $6 per $1,000 in the Colony as against a duty of 1 per cent. in England, Ceylon, and Hong Kong.

It should be added that so far as death duties are concerned, we think it probable that a good deal of property is at present concealed, undervalued, or passes without being taxed. We consider that a tightening up in the collection of death duties might be effected.

31. Increased Taxes on Vehicles.-We are of the opinion that the taxes on vehicles could be considerably increased, as with the excellent roads of the present day the wear and tear on vehicles is considerably less than in the past, and it seems only equitable that vehicles should bear the cost of the roads which make their use possible. The division of the taxes collected, between the Municipalities and the Rural Boards, should not present any great difficulty.

32. Increase of Petroleum Duty.-We are in favour of this only as a means of taxing vehicles in proportion to the use they make of the roads. Such a duty would have the advantage of providing revenue in direct proportion to the mileage covered and resultant wear and tear of the roads and their cost of maintenance, while being easily collected. A vehicles tax and a petroleum duty would make motoring slightly. more expensive and the two together would presumably form a fairer tax than either singly.

33. Government Pawn-shops.-We understand that in the Netherlands East Indies pawn-shops are owned by the Government. We think that it might be worth while to investigate the Dutch system so as to ascertain whether a similar system could be advantageously introduced here.

34. House Taz.--This tax could be collected from landlords through the Munici- pality. It has the advantage of being easily collected but there are the serious objec- tions that it would add largely to the cost of living, and that in the case of houses where families occupy a room each a tax imposed on the house would probably be passed on to the inmates in such a way that the landlord could collect more than the tax he was paying.

35. Income Tax.-This is one of the few taxes by which a really large increase of revenue could be obtained, but it is a most unpopular tax and subject to the almost insuperable objection that the incidence falls unfairly on the honest taxpayer. Income tax should not, in our opinion, be revived until all other means of raising sufficient revenue have been tried.

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