CO129-532-1 Basis of assessment for military contributions 9-12-1930 - 29-3-1932 — Page 16

15

(14)

receipts basis.

nhat

Our second line of defence

here is even if they are not treated wholly on a net receipts basis, Hong Kong is entitled,

to deduct an allowance on the capital expendi-

ture met out of revenue. It is clear from the

enclosure to No.1 that Hong Kong think they

are entitled to do this under their law. Mr.

Roseway took the view that such deduction is

only permissible when the revenue in question is being treated on a net receipts basis. Looking at the correspondence printed in Eastern

123, Nos.189 et seq., I am afraid that it is

probable that the War Office are right as

regards their intentions at that time. I

have, however, consulted Mr. Roberts-Wray as

to the meaning of the Ordinance as it now

stands (see minute attached) and he agrees with

the Hong Kong view. I think therefore we

should take the line that Hong Kong are entitled

to make this deduction under their Ordinance,

the draft of which was concurred in by the

War Office, and leave the War Office to raise

the issue of intention if they want to.

Finally, in connection with the

Water Works, there is the exemption of the

interest on the loan raised in 1927. Here I

play

think we must make the best we can with

m

the precedent of the Straits Settlements Harbour

and River improvements expenditure in 1906

(see Nos.93 97 in Eastern 123). In that

case special taxation was imposed to meet the

cost of improvements, and the Straits took the

precaution of getting exemption before pro-

ceeding with the work. Hong Kong did not

impose