CO129-553-9 Empire Air Mail Services- participation of Hong Kong in proposed development 11-3-1935 - 21-5-1935 — Page 3

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It is a typically rigid attitude which

the War Office have taken up, but we can afford to

put in a retort. There is no great hurry and we

have in fact a pretty good case here.

I would say now to the War Office that

in H.K.

the Secretary of State is aware of the extension

recently agreed upon in the list of revenue classes

which are exempted or partially exempted from

assessment for Defence Contribution, but that he

would not be prepared to agree that the review

then carried out must be accepted necessarily as

rendering a full consideration of the present

question an impracticable or undesirable course

In the memorandum submitted by the

War Office in 1931 which contained a statement of

the principle followed with regard to Defence

Contribution in Hong Kong it was stated that the

system of a contribution limited to a percentage

of revenue was designed to produce roughly a fair

contribution in view not only of the cost of the

garrison but also of the general financial capacity

of the Colony; since the present application

relates to the exemption of revenue in respect of

an annual expense which Hong Kong is called upon

to bear as its share in a project deemed to be in

the interest of the Empire generally (including

of course Hong Kong) it would appear that the

Colony has a reasonable case for claiming not only

that the local financial capacity is proportionately

limited, but especially that her contribution towards

this Empire service should not be made more onerous

by itself being increased by 20% owing to the

liability