CO129-358 - Governor Sir Lugard - 1909 [10-11] — Page 201

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incompatible with the conditions of Hongkong.

193

The same principle applies to all remunerative under-

takings. It is under the existing system of Military Contri-

bution less costly for the Government to farm out, or contract

for the carrying out of, such undortakings since in that case only the net sum paid by the contractor is credited to Revenue, whereas were Government to undertake the work the gross earnings, including the cost of machinery etc., would appear under

Revenue and be assessable to Military Contribution. It seeme

unnecessary to point out that this is a vicious principle, for

in many cases direct Government control may be preferable, and in every case the contractor's profits are lost to the Revenue.

Imperial as well

(b) The existing system cramps expansion

B

as Colonial. If the Colonial Government undertakes the organisation and control of an institution only indirectly connected with the Colony, it is at a loss unless the institu- tion provides a sufficient balance to cover Military Contri- bution, and sums paid by these directly interested, towards the cost of maintenance become liable to this deduction.

In

Thus Hongkong undertakes the upkeep of the Gap Rock Lighthouse, 30 miles from Colonial waters and in Chinese territory. For this service China pays a sum, and upon this sup the Government has to pay 20% to the Defence Fund. order to be free of expense in the matter, the Colonial Govern- ment would have to increase the payment by China by 20%, but this is clearly inadmissible because the accounts would show no such deficit, and China would in fact be called upon to contribute to the Imperial Forces.

Or again,

Hongkong (largely in Imperial interests), maintains postal Agencies at the Treaty Ports of China. Towards

pay £710 %. a. on which the prot this service the Iprefial' Government,

t/paya 20% to Military

Contribution.

The Agoniss would be worked at a small profit

but the 20% payable on the gross receipts derived from them

converty