58
5
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 para- graph 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 avoid burdening new construction with a heavy surcharge on account of the military contribution. It thereby promoted the development of the Colonial railways. It was agreed that only such portion of the railway receipts should be included in the assessable revenue as would, if the railways were a commercial speculation, and allowing for the interest on capital expenditure, be available for the payment of dividend. The Colonies in which this practice was approved were permitted to deduct from the gross railway revenue the charges for working expenses and main- tenance and for interest and sinking fund on any sums borrowed for the construction of the railways. As explained above, the percentage of assessable revenue on which the contribution is calculated was raised from 7 to 9 in the case of Ceylon, and from 5 to 5 in the case of Mauritius, where railways existed at the time of the Settlement, to enable the yield of the percentage to be approximately the same in each case as it was before the special concession was introduced for railway receipts.
Subsequently in 1899 it was agreed at the suggestion of the Colonial Office that a similar arrangement to that for existing railways should be adopted in the case of new (ie., they did not exist when the percentages were fixed) undertakings such as railways, tramways, gas or electric lighting, or other productive works, where such new commercial undertakings are not different in character and productiveness from railways. The appropriate Colonial Ordinances relating to military contributions were amended accordingly. It is important to note, however, that the Treasury when approving this concession stated that each case as it arises should be considered on its merits by the three departments concerned before Her Majesty's Government commits itself to the calculation of the percentage on net instead of gross receipts." (Treasury letter No. 9892/99 of 22nd June, 1899, to the Colonial Office (Straits Settlements).) (See also Treasury letter No. 15072/11 to the Colonial Office of 12th August, 1911 (Hong Kong).) This method of assessment has since been applied, without alteration of the relative percentage, to railways (Straits Settlements 1897, Hong Kong 1911), telephones and tramways (Straits Settlements 1899), and opium factory (Straits Settlements 1910), arrack distilleries (Ceylon 1912), wharves (Straits Settlements 1911), all of which undertakings were not in operation in 1895.
The method has never been applied to Post Offices, but these of course were in operation in 1895 and refusal has been based on the principle that treatment of postal receipts on the net basis would involve adjustment of the percentage.
5. Capital Expenditure. In addition, it has been agreed (Treasury letter No. 6103/04 of 19th April, 1904, to the War Office (Straits Settlements)), that where the revenue of the Government undertakings under consideration is dealt with on the basis of net receipts, if any capital expenditure thereon is provided from annual revenue (instead of being provided by a loan, see paragraph 2 of Colonial Office letter of 21st March, 1904, to the War Office (Straits Settlements)) a deduction of 4 per cent. of such capital expenditure may be made for a period of 50 years from the gross receipts of such undertakings. The service of a loan, interest, and sinking fund is one of the expenses of an undertaking to be deducted from the gross total when netting receipts and the rebate represents a corresponding allowance. The rate of 4 per cent. represents 3 per cent. for interest and 1 per cent. for sinking fund (paragraph 5 of Colonial Office letter of 21st March, 1904, to the War Office). At the time it was stated that loans could not be raised at less than 3 per cent. When the system was introduced, the deductions were not made retrospective in respect of past expenditure, but were allowed to be continued for 50 years in respect of such expenditure. The concession does not apply if the capital expenditure met from revenue is not permanently borne by revenue, i.e., if a loan is subsequently floated to repay to revenue any sums tem- porarily utilized from revenue (Treasury letter No. 15603/12 to Colonial Office of 12th August, 1912 (Mauritius)).
"C
It should also be noted that it has been pointed ont definitely in connexion with loans for special services (Treasury letter No. 7673/08 of 8th August, 1908, to the Colonial Office (Straits Settlements)) that it cannot be admitted that in all cases revenue raised for the purpose of paying interest oh loans for certain purposes would be exempt from assessment to military contribution," and as regards capital expenditure met from revenue (War Office letter of 18th July, 1908, to Treasury (Hong Kong)) the Army Council are not prepared to admit as a general principle that the appropriation of revenue to capital expenditure should entitle a Colony to the exclusion of such revenue in calculating military contribution."
CC
6. Class II. Exclusion completely of certain items not regarded as revenue. -No general principle has governed the decisions in this class. Each case has been examined on its merits. It may, however, be said that in certain cases reimbursements received by a Colony for activities outside its normal functions have been approved for exclusion, e.g., repayments of loans raised to relieve distress, or to enable colonists to purchase mechanical transport. Again, where the expenses of a special service have exceeded the derived revenue, exemption has been given (Hong Kong, receipts of Weihaiwei Post Office, with the condition that the net receipts basis should be adopted if the revenue at any time exceeded the expenditure).
1)
On the other hand, items which might strictly be regarded as not revenue have not been exempted, when application has been made, because they were included in the gross revenue in 1895, e.g., Local Revenue, District collections (not municipal) made in the Straits Settlements for roads, land drainage, &c., which must be expanded by the Government in full in the localities where raised, refused 1907.
The revenue derived from Christmas Island and Labuan, which came under the Government of the Straits Settlements after 1895 and have no garrison, was exempted from the contribution while the expenditure on them exceeded the revenue. With the growth of revenue from these sources, the items are now treated on the basis of net receipts
7
Class III. Special exemptions. Revenue from taxation of a purely tem- porary character definitely earmarked for a particular service has been exempted in certain cases. Where a special tax has been levied for purposes of harbour improve- ments on the adjacent property owners who will benefit, the proceeds were exempted (Straits Settlements). The exclusion from assessment of revenue specially raised in Mauritius to enable anti-malarial measures to be undertaken was agreed to in principle.
II. The Claims now made by the Government of Hong Kong for Modification of
Assessable Revenue.
Note. The effect on the appropriations-in-aid to Army Funds of the suggested modification has been measured in sterling, taking the dollar as equal 1s., the approxi-
mate rate now current.
8.
In Colonial Office letter of 27th February, 1931, the Colonial office put forward a claim from the Governor of Hong Kong for certain items of the revenue of the Colony of Hong Kong to be exempted from assessment for military contribution. It was stated in October, 1928 (Colonial Office letter of 12th October, 1928), that such a claim would be made in the event of our not agreeing to the Colony's proposal to alter the method of assessment from percentage of revenue to percentage of rateable valuation. The Colony's proposal was refused and a despatch (Colonial Office to the Governor of 26th July, 1930), to the Governor in July, 1930, was agreed with the Treasury and the Colonial Office which, while notifying the refusal of the proposal to alter the basis of assessment, indicated that consideration was being given to the question as to whether any modifications in the existing system were desirable and possible in order to bring it up to date. The Colony were asked to submit details of the concessions they thought were equitable, but were also informed that the general principles governing any deduction from gross revenue laid down by the Haliburton Committee would have to be borne in mind. In particular, the Colony were reminded that the exemption from assessment for contribution of any items of revenue which were taken into account in reaching the present basis of the contribution, i.e., 20 per cent. of the assessable revenue, would pro tanto "disturb the proportion between means and contribution (established by the Haliburton Committee)
it would accordingly be necessary to restore the proportion by a corresponding increase in the percentage."
The items originally suggested by the Governor of Ilong Kong as proper for modifi- cation before the percentage of revenue was applied for calculation of the contribution are given in the enclosures to the Colonial Office letter of 12th October, 1928, as follows:-
(a) Wireless Telegraphy
(b) Waterworks
(c) Aerodrome
(d) Harbour Dredging
(e) Post Office
(f) Ferries
To be treated on the basis of net receipts.
(g) Operations properly chargeable to municipal rates to be excluded. In addition, the Colony suggested that the interest on capital expenditure defrayed from revenue in undertakings treated on the net receipts basis should be increased
(18280)
59
No comments yet.
Private notes are available after approval.