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it has been the practice in the past to credit with the amount received the sub-head from which payment was originally made: but such procedure, although correct in cases where payment and refund fall within one and the same financial year, is clearly improper where these do not so fall; the result of such a practice being to cause the sub-head so credited to show an excess over the amount sanctioned under the Appropriation Ordinance for the year in question. Accordingly, since December, 1930, all such receipts have been credited to general revenue under the head "Miscellaneous Receipts-Overpayments in previous years," and are thus in theory subject to assessment for military contribution although in fact they represent sums on which military contribution has already been paid.

I have, &c.,

Enclosure in No. 74.

W. PEEL,

Governor, &c.

OVERPAYMENTS RECOVERED IN 1931 IN RESPECT OF PREVIOUS YEARS.

Principal Items.

$2,882.74 Various refunds for work done by Public Works Department during 1930

originally charged to expenditure.

$1,958.40 Refund by Miss W. E. Dakin, Nursing Sister, being cost of outward passage

on appointment originally paid in January, 1929.

$950.50 Refund by Linotype and Machinery, Limited, through Crown Agents, £50 at is. 0ğd.= $950.50, originally paid in August, 1930 (Crown Agent's Voucher No. 368).

$465.00 Refund of language study allowances by various officers originally paid in

1929 and 1930.

$254.26 Errors in payment vouchers originally paid in 1980.

$74.19 Refund by Mr. E. H. Williams, £4 10s. 5d. at Is. 2§d. of salary overpaid

by Crown Agents.

$106.67 Refund of cost of repairs to gauge-testing machines received damaged

originally paid in June, 1930.

$9,600.00 Refund of military contributions paid by Colony in respect of Postal Agencies' share of money order transactions, 1911 to 1922 (20 per cent on $48,000). Reference letter dated 7th February, 1929, from Comptroller and Accountant-General, General Post Office, to Postmaster-General, Hong Kong and reply of 10th July, 1981, from Postmaster-General, Hong Kong.

C. 82756/31 [No. 24],

No. 75.

COLONIAL OFFICE

to

WAR OFFICE.

SIR,

Downing Street, 29th March, 1932. With reference to paragraph E of the letter from this Department of 20th November last*, regarding the exemption of certain items of Hong Kong revenue from assessment for military contribution, I am directed by Secretary Sir Philip Cunliffe-Lister to request you to inform the Army Council that the Governor of Hong Kong has reported that there is a possibility of a profit being made on the House Service Account, and that he is prepared to give an undertaking that should a profit at any time be made by the Govern- ment on these transactions, it will be included in the revenue subject to assessment,

I am, &c..

H. R. COWELL.

C. 92622/32 [No. 1].'

SIR,

119

No. 76.

WAR OFFICE

to

COLONIAL OFFICE.

[Answered by No. 78.]

The War Office, London, S.W.1, 25th April, 1932.

I am commanded by the Army Council to refer to your letter of 20th November, 1931*. regarding the exemption from assessment for military contribution or other special treatment of certain items of the revenue of Hong Kong, and to offer for the information of Secretary Sir Philip Cunliffe-Lister the following remarks on the several points raised in the letter.

A. Wireless Telegraphy.

2. The Council agree that this undertaking can be regarded as a productive under- taking and subject to assessment on net receipts only. The Council agree, moreover, that in this and other recognized productive undertakings, a case has been established for increasing the rate of allowance in respect of capital expenditure met from revenue, above the 4 per cent permissible, under the current Military Contribution Ordinance. In view of the data which have been furnished showing the rates of interest at which Colonial Loans have been raised in London since 1915, an allowance of 5 per cent to cover interest alone would appear to be justified. The corresponding sinking fund allowance for such a rate of interest over a period of 50 years does not, however, exceed per cent, and after full consideration of the arguments adduced by your Department for an increase of the total allowance to 6 per cent, the Council feel that the maximum allowance to be made should not be more than 5 per cent. They are prepared to agree to the adoption of this rate of allowance in respect of capital expenditure on recognized productive under- takings incurred from revenue since 1915 or to be incurred in the future, and to the extension of a similar concession to other Colonics which may be affected. If the rates of interest at which loans are raised should subsequently diminish appreciably, the Council may desire to reopen the question of the rate of allowance for future capital expenditure. The Council agree that the treatment of this allowance, if the wireless telegraphy under taking is transferred to any other body before the expiration of the period of 50 years, running from 1932, can be left for consideration when such transfer arises.

B. Use of Government Motor Vans.

3. The Council now agree, in the light of the further remarks in your letter, that revenue from this source should be treated on the basis of net receipts.

C. Gap Rock Lighthouse.

4. The Council are prepared to agree, as a special concession in view of the exceptional interest which the Colony apparently take in this claim, despite the trifling amount involved, that this claim shall be wholly excluded from the revenue subject to assessment. It should be clearly understood that this concession is without prejudice to the general principle that no item which was included in assessable revenue when the percentage was fixed can now be excluded without reconsideration of the percentages.'

D. Anti-Piracy Escorts,

F. Overpayments.

5. The Council agree, in view of the remarks in your letter and of the further informa- tion which has been furnished as regards Item F., that these items may be wholly excluded from the revenue assessable to military contribution, as being in the nature of reimburse- ments of special expenditure or accounting adjustments.

E. House Service Account.

6. The Council agree that the revenue from this source should be excluded from assessment, subject, in view of the further information contained in your letter of 29th March, 19321, to the proviso that if at any time a profit is made on this Account, the profit should be included in the assessable revenue, In order that the point should not be overlooked, it is considered that the items should be treated in the annual statement of assessable revenue on the basis of net receipts.

• No. 78.

(C 38051)

• No. 73.

↑ No. 75.

K2

PUBLIC RECORD OFFICE

Reference :-

C.O.882/11

PUBLIC RECORD OFFICE, LONDON

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