74
155/12/14
(b) Inclusion of net receipts only of certain
productive enterprises
Kowloon Canton Railway.
11 opium monopoly.
11.
It is claimed by the Colony that if the assessment is to remain on its present basis, these qualifications are too narrow, and that if the new proposal that the assessment should be made on the rat eable value is not accepted, further claims should be allowed in relief of the present scale of contribution. These claims, according to the Governor's despatch of 28th July, 1928, are as follows:-
12.
i
Profits on sterling securities when sold owing to the fall in exchange should not be taxable for military contribution as they are at present.
*
ant
(ii) Interest and sinking fund on capital expenditure on
railways and similar productive undertakings financed out of revenue should be allowed at 66 instead of the original 4% allowed under Section 3 of the Ordinance.
(111)
4% 211
Other productive undertakings should be assessed on net receipts, as follows:-
A
) Wireless telegraphy.
b) Waterworks.
Aerodromes.
(d) Harbour dredging.
Posts.
Ferries.
g) Municipal undertakings.
·
As to (i) of paragraph 11, Hong Kong st at es 'that these securities are due largely to the proceeds of land sales and may be considered as part of the Colony's capital. Differences i: book values are not assessable; only when any profits are made owing to sales do they become assessable. Colonial Regulations 1928, paragraph 291, provide as to sale of securites that "no record of any profit or loss in relation to the purchase price will be made except in case of a sale of investments on account of surplus balances, when any resulting profit will be carried to current revenue and any loss charged to expenditure" This regulation does not distinguish between cases in which the profit (loss) arises from appreciation (depreciation) of sterling values and those in which the profit (loss) is due to a fall (rise) in exchange. Hong Kong has admitted that military contribution is payable on profits ralised by a sale of securities at an appreciated sterling válue, i̟.e.,the colony agrees that they are revenue (despatch No. 376 of 24th December, 1923), but now proceeds to draw a distinction between such profits and those due to a fall in exchange. The War office's view is that this distinction is not tenable. The amount involved is not known but it cannot be considerable. There might be something to be said for treating these transactions on investments (i.e., those relating to surplus balances) on a "net receipts" basis.
*
13./
War Office letter to Treasury No. 10/3720 (F.1 of
5th May, 1924.
7
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