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on for a considerable period, if not for years, for the time formerly claimed as necessary for the fermentation of rice, ranging up to 60 days, allowed sufficient time for 4 to 5 complete fermentations and distillations to be carried out for every one reported. The frauds were detected in various indirect ways, but the real reason became manifest why distilleries as a body objected to Revenue Officers opening jars of fermenting rice for inspection. Had jars been opened the fraud would have at once become apparent to any experienced officer. Experiments are in hand to discover the effect on fermentation of a sudden drop in temperature. It should be possible to prevent this type of fraud during the warm months of the year by reducing considerably the time allowed for the fermentation of rice. But during the winter months when the indoor temperature falls below 60° F. fermentation is retarded for longer and shorter periods, and it becomes a matter of some difficulty to fix such a period as shall be sufficient, but leave no loop-hole for this type of fraud. In three cases convictions were obtained, and in the other two the licensees admitted the fraud and paid up considerable arrears of duty.
(e) In all 9 distilleries were detected in extensive frauds on the Revenue, six were convicted out of seven prosecuted, and two paid up arrears of duty.
(f) It cannot unfortunately yet be said that distillery control is easy. Very few distilleries yet realise that fraud in the long run must be detected, and that detection is every year becoming more certain as the technical knowledge and practical experience of this Department increase as the result of continued experiment and observation. In some cases the businesses were on the verge of bankruptcy when the frauds came to light. In others the fraud was probably for the benefit of the managing partner, not of the firm as a whole. In one case it appeared probable that the employees only were concerned. But while the capital invested in any distillery is so small, a successful fraud carried on for a short time only may enable the capital to be doubled. For in many cases neither the site, building nor most of the utensils belong to the firm. Yet, in the case of the smallest fraud discovered, the illicit gains made by the evasion of duty were over $100 per week. It is estimated that the evasions of duty detected during the year were at the rate of over $200,000 per annum in the case of distilleries alone.
(g) Distillery control is now as thorough as the amount of duty collected justifies. In 1923 one Revenue Officer only was inspecting distilleries, which were three times as numerous; five days a week were spent in Hong Kong Island and the Kowloon Peninsula, and only a half day in paying a flying visit to the New Territories. All the small distilleries in the New Territories were controlled by the nearest Police station, whose European Officer had little time to spare and no technical training, and was liable to frequent transfers. At the present time one
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on for a considerable period, if not for years, for the time formerly claimed as necessary for the fermentation of rice, ranging up to 60 days, allowed sufficient time for 4 to 5 com- plete fermentations and distillations to be carried out for every one reported. The frauds were detected in various indirect ways, but the real reason became manifest why distilleries as a body objected to Revenue Officers opening jars of fermenting rice for inspection. Had jars been opened the fraud would have at once become apparent to any experienced officer. Ex- periments are in hand to discover the effect on fermentation of a sudden drop in temperature. It should be possible to prevent this type of fraud during the warm months of the year by reducing considerably the time allowed for the fermentation of rice. But during the winter months when the indoor tem- perature falls below 60° F. fermentation is retarded for longer and shorter periods, and it becomes a matter of some difficulty to fix such a period as shall be sufficient, but leave no loop-hole for this type of fraud. In three cases convictions were obtained, and in the other two the licensees admitted the fraud and paid up considerable arrears of duty.
(e) In all 9 distilleries were detected in extensive frauds on the Revenue, six were convicted out of seven prosecuted, and two paid up arrears of duty.
(f) It cannot unfortunately yet be said that distillery con- trol is easy. Very few distilleries yet realise that fraud in the long run must be detected, and that detection is every year becoming more certain as the technical knowledge and practical experience of this Department increase as the result of continued experiment and observation. In some
cases the businesses were on the verge of bankruptcy when the frauds came to light. In others the fraud was probably for the benefit of the managing partner, not of the firm as a whole. In one case it appeared probable that the employees only were concerned. But while the capital invested in any distillery is so small, a successful fraud carried on for a short time only may enable the capital to be doubled. For in many cases neither the site, building nor most of the utensils belong to the firm. Yet, in the case of the smallest fraud discovered, the illicit gains made by the evasion of duty were over $100 per week. It is estimated that the evasions of duty detected during the year were at the rate of over $200,000 per annum in the case of distilleries alone.
(9) Distillery control is now as thorough as the amount of duty collected justifies. In 1923 one Revenue Officer only was inspecting distilleries, which were three times as numerous; five days a week were spent in Hong Kong Island and the Kowloon Peninsula, and only a half day in paying a flying visit to the New Territories. All the small distilleries in the New Territories were controlled by the nearest Police station, whose European Officer had little time to spare and no technical training, and was liable to frequent transfers. At the present time one
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