C. 92622/32 [No. 11].
No.
PROOF.
SIR,
COLONIAL OFFICE to WAR OFFICE.
[Answered by No.
.]
Downing Street, 14th October, 1932. I AM directed by Secretary Sir Philip Cunliffe-Lister to refer to the letter from this Department of the 19th of August* on the assessment of revenue for military contribution in Hong Kong.
2. In paragraph 11 of that letter reference is made to the question of the assess- ment of the profits arising from the appreciation of securities held by the Hong Kong Government. This matter has been further discussed semi-officially with representa- tives of the War Office. It is understood that the position of the Army Council is as follows. They do not claim military contribution on any sums transferred to revenue under Colonial Regulation 291 in respect of the appreciation of investments, repre- senting merely book profits. On the other hand they are unable to accept the con- tention of the Hong Kong authorities that a distinction should be drawn between sterling appreciation and dollar appreciation; on this point Sir Philip Cunliffe-Lister is in entire agreement with the Army Council. Finally, the Army Council do not claim military contribution on profits arising from the appreciation of investments, even when realized, unless the investments in question were made out of the general revenue or surplus balances of the Colony.
3. In the result, the net claim of the Army Council is that military contribution should be levied on actually realized profits arising from the appreciation of invest- ments made out of surplus General Revenue of the Colony, without distinction between the profits arising from sterling appreciation of the securities and profits arising from depreciation of the Hong Kong dollar. In so far, however, as the investments may be held to have been made out of the land sales revenue, which is not itself subject to military contribution, it is understood that the Army Council could not claim military contribution on the profits arising from the appreciation of such investments, in spite of their refusal to agree that the ordinary income from such investments, i.e., interest, should be exempted from assessment unless such interest in re-invested.
As pre- viously indicated, the total land sales revenue of the Colonial Government during the period in which the investments have been made very considerably exceeds the amount of its investments. I am accordingly to request you to inform the Army Council that any portion of the appreciation in investments which should be regarded as appreciation in investments made from General Revenue can in any event he only very small. Sir Philip Cunliffe-Lister will be glad to learn that, in these circumstances the Army Council are prepared to agree to the exemption from assessment to military contribu- tion of realized profits on the appreciation of the investments of the Hong Kong Government.
4. A copy of this letter is being sent to the Treasury.
I am,
&c.,
H. R. COWELL.
Straits Defence Con.-Gp, 6.
* No. C. 92622/32 [No. 5]. 131/2963. 24. 8/34.
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