CO129-547-4 Military contributions 23-2-1934 - 28-11-1934 — Page 9

Working Expenses Interest at 3+% on $3,400,000

1,630, 611

$

886,381

119,000

1,005,381

1,005,381

Net Profits

625,230

$125,046

A

Amount payable in Military Contribution (20%)

In other words the amount payable in Military Contribution would be some $15,000 more than was payable in 1933 before the redemption of the major part, and the conversion of the remainder, of the 1918/43 Sterling Stock

took place.

It would, however, be possible, and

a

A

I think permissible, for the Hong Kong Government to eliminate its liability for Military Contribution on the profits of the

fraction Railway, by redeeming annually an out of the $3,400,000 of the new loan equal to the net profits calculated in the manner indicated

above. The revenue required for such redemption would be exempt from assessment for Military Contribution under the 1911

(almost)

agreement and that exemption would continue in fact until the whole of the $3,400,000 in the new loan had been redeemed. Thereafter the Railway would probably show annual net profits which would be assessable for Military Contribution. Therefore if it is held that

the conversion of a portion of the 1906

Railway loan does not extinguish its identity,

the

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16

A

the Hong Kong Government will be in a position,

under the 1911 agreement, to avoid paying

Military Contribution on the revenue required

for the service of the $3,400,000 to be raised

to effect that conversion unless a position arises

in which the working expenses of the Railway

approximate to or exceed its gross revenue receipts

- an unlikely contingency.

A.

B.

The position then appears to be:

If conversion extinguishes the identity

of the remainder of the 1906 Railway Loan

the Hong Kong Governments liability for

Military Contribution will be increased

notwithstanding the redemption of the 1887,

the 1893 and the major portion of the 1906

unless these occurs a marked reduction in the Colony's Gross Avenue) loan Therefore it would be inequitable

for them to be required in addition to pay

Military Contribution in respect of the

revenue required for the service of the

$3,400,000 item in the new $25,000,000

loan:

a

If conversion does not extinguish the

identity of the remainder of the 1906

Loan it will be possible and permissible

for the Hong Kong Government under the 1911

agreement to avoid paying Military Contri-

bution on the revenue required for the

service of the $3,400,000 of the new loan

as long as the gross revenue of the

Railway exceeds its working expenses.

Therefore the exemption of that revenue from

military contribution in the Ordinance

11/1934 will have no practical effect.

C.

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