C. 92622/32 [No. 16].
No.
WAR OFFICE to COLONIAL OFFICE.
[Answered by No. C. 92622/32 [No. 18].]
PROOF.
SIR,
The War Office, London, S.W.1, 25th February, 1933. WITH reference to your letter of the 19th August, 1932,* on the subject of claims for exemption from assessment for military contribution or other special treat- ment of certain items of the revenue of Hong Kong, I am commanded by the Army Council to acquaint you for the information of Secretary Sir Philip Cunliffe-Lister that they have been in communication with the Treasury on the subject.
I am to state that the Lords Commissioners of His Majesty's Treasury concur in the agreement which has been reached as regards the treatment of the items detailed in paragraphs 2, 3, 4, 5 and 6 of War Office letter of the 25th April, 1932.†
In connexion, however, with the general question of the rate of allowance, in respect of capital expenditure met from revenue, to be used in calculating the net receipts of recognized productive undertakings, raised on the item dealt with in para- graph 2 of the War Office letter referred to, the Army Council consider and the Treasury concur that in view of the fact that loans generally can now be raised at rates of interest not appreciably higher than those current prior to the outbreak of war in 1914, the increase from 4 per cent. to 5 per cent. in the allowance in respect of capital expen- diture met from revenue would not be justified beyond 1932. The 5 per cent. rate should, therefore, only apply to the allowance to be given for capital expenditure met from revenue during the period 1915 to 1932. For expenditure arising after 1933 the old rate should be used.
With regard to the question of the treatment of waterworks revenue Their Lord- ships concur in the Army Council's view that the proposal to treat the waterworks in the New Territories as a new productive undertaking, involving the assessment for military contribution of the revenue from those waterworks on a net receipts basis, would constitute a violation of the underlying principles on which the calculation of the military contribution is based and that therefore such a proposal cannot be accepted. As regards the waterworks loan charges, Their Lordships infer that the Secretary of State for the Colonies apparently no longer desires to sustain the view that Section 15 of the Hong Kong Loan Ordinance No. 14 of 1927 can be supported by reference to the precedent of the river and harbour improvements in the Straits Settlements in 1906; they are in agreement with the Army Council's view that the concession made in Section 15 was erroneous, and consider that it should afford no precedent in any future case. They note, however, the representations of the Acting Governor, endorsed by your Department, as to the opposition and bitterness that would be aroused by any attempt to repeal this Section; and they accept the submission, made by the Army Council, that in all the circumstances it is not now practicable to repeal it.
As regards the proposed new loan of approximately $28,000,000 to be raised gradually for general development purposes, Their Lordships are prepared to agree with the Council that, as a special concession and without prejudice to the principles of the military contribution, the amounts raised by extra taxation and appropriated from revenue to meet the interest and sinking fund charges of the new public works loan should in this instance be exempted from assessment for military contribution, provided that the claim to treat waterworks revenue, wherever derived, on the basis of net receipts is abandoned.
I am also to refer to your letter of 14th October, 1932, and previous correspon- dence on the subject of the assessment to contribution of realized profits arising from the appreciation of securities held by the Government of Hong Kong, and to state for the information of Secretary Sir Philip Cunliffe-Lister that the Council accept the statement of the War Office views contained in paragraphs 2 and 3 of your letter under reference, on the understanding that the investments hitherto made from general revenue can only be small and their appreciation correspondingly negligible; and, with the concurrence of the Treasury, they accordingly agree to the exemption from assess ment to military contribution of realized profits on the appreciation of investments of the Hong Kong Government, subject to its being agreed that realized profits from investments of general revenue are in principle subject to assessment to military con-
tribution.
* No. C. 92622/32 [No. 5].
† No. C. 92622/32 [No. 1].
‡ No. C. 92622/32 [No. 11]. Straits Defence Con.-Gp. 6. 131/2963. 24. 8/34. (18301) M. & S. Ltd.
84
No comments yet.
Private notes are available after approval.