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The contribution, however, previously (1895) proposed for these two Colonies were excave of certain expenditure on lands and buildings borne by the Colony. The Straits subsequently pressed for an inclusivs rate of 20 per cent to cover all military expenditure, and this arrangement was agreed to, the same terms being applied to Hong Kong.
The settlement thus finally arrived at is that in
forco today.
2. The general principles governing the method of calculating the contribution are well indicated in the following terms:- "The use of a fized percentage of revere to determine the amount of the contribution is in itself merely a mode of calculation not based upon considerations of equity in its application to this or that class of revenus but designed to produce roughly a fair contribution in view of the cost of the garrison and the general financial capacity of the Colony, and to enable the sum payable annually to be readily arrived at. It follows that no change of principlo can properly be made in the items which compose the revenue on which the percentage is calculated without raising the question of an increase (or decrease as the case may be) of the percentage itself" (War Office letter to Colonial Office No. 084/4408 (F.1) of 13th March, 1908 (Hong Kong)). The point made in the last sentence quoted has been brought out on many occasions during the course of correspondence regarding the military contributions.
3. In the Appendix attached to this Memorandum is a list of the modifications that have been agreed to or refused since the Settlement of 1895, complete to date as far as the War Office records show.
It will be seen that there are three main classes in which a modification of the basis of assessable revenue in the original settlement has been approved.
Class I allows of the inclusion in the total assessable revenue of the net receipts and not the gross receipts of certain forms of revenue.
Class II allows of the exclusion from the gross revenue of certain items which are not considered to be "revenue".
Class III allows ef the exclusion from the gross revenue of certain items on account of special ad hoc circumstances.
4.
Dealing with the principles underlying the three classes of modification, the most important is that relating to net receipts.
Class I. Inclusion of revenue on basis of net receipts.
This class is derived from the exemption made by the Haliburton Committee (Section XIII of 1897) (see paragraph 1 above) in the particular case of gross revenue derived from railways. The exemption was intended to assist the Colonies at a time when railway expansion was considerable, and to aveid burdening new construction with a heavy surcharge on account of the military contribution. It thereby promoted
the/
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