CO129-519-4 Adjustment of exchange account- payment of military contribution on profit on exchange 10-9-1929 - 10-6-1931 — Page 6

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not clear what has happened to the Military Contribution on this amount, which would, I take it,

appear as Revenue.

In 1927 and 1928 routine realizations

by the Crown Agents involved the transfer of further

sums to revenue in respect of dollar appreciation

and the corresponding 20% deduction was added to the

"Suspense Account Military Contribution" which now

stands at $504,104.70.

The Governor asks that this sum and any

future profits on realization, i.e. profits due to a fall in the exchange as opposed to profits due to sterling appreciation, should be exempt from Military

The War Office view see Section 12

Contribution.

of Memorandum in 3 on 62832

-

is that the distinction

between the two forms of profit is untenable, but that "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.

War Office attitude is reasonable.

A

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But surely is a pretty generally

ว The

Dollar appreciation

is "profit" internally no less than sterling

appreciation, although it is true that the same fall in exchange which produces this "profit" also

automatically increases the burden of expenditure ·

I question the statement (paragraph 9 of this despatch) that revenue will remain unaffected in spite

of a falling exchange.

Paragraph 11 states a curious argument,

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based on the questionable assumption that/is sounder

accepted principh? finance to sell securities outright rather than to

G.L.M.G

have recourse to temporary bankers loans.

As regards investments made by Crown Agents (see paras 2, 12 and 13), there are